Repaying loans isn’t as simple as taking them. Of course, when you take a loan, you get the money. However, when you return it, the money goes out of your pocket. Not to mention, the interest fee that breaks your bank, making the entire process more and more difficult.
However, you don’t have to worry about it. Numerous debt plans can simplify the process of repaying your loans. Simply choose one and stick to it until you’re all clean and free of debt. Have a look:
The Debt Snowball Method
First and foremost, we have the debt snowball method. It’s a great debt plan for people who have multiple small debts. Of course, it’s not easy paying off debt, let alone multiple debts. The debt snowball method can make it easier for you by breaking down your debts.
In this method, you hit the smallest debt first and then move to the second smallest. Following this pattern, this debt plan keeps you motivated by providing you with instant gratification. Once you get done with one of your debts, it brings you a sense of achievement.
The Debt Avalanche Method
One of the biggest reasons the debt snowball method doesn’t suit everyone is because it leaves the issue of the interest rate unaddressed. Well, it isn’t the same with the debt avalanche method.
In this method, you make minimum payments on all your debts and direct a big chunk of money to the debt with the highest interest rate. This way, the interest fee doesn’t burden you as you get rid of it all.
Ranking third is debt consolidation. For those who are unable to pay their debt due to minimal income or monthly bills, a debt consolidation is a great option. It also works well for people who have huge interest fees hanging on their heads.
In debt consolidation, you take a consolidation loan and pay off your debt all at once or in two parts. If you have a good credit score, your consolidation loan will come with a minimal interest rate, so you don’t have to worry. It isn’t another debt trap.
An Individual Voluntary Arrangement
An individual voluntary arrangement, commonly referred to as an IVA, is a legal arrangement between you and your creditor about the debt payments. It settles the interest fee and buys some time to repay your loan.
If you’re out of money and the deadline to repay your loan is pressurizing you, an IVA is a method for you. It also works well for people who are tired of their creditors harassing them for payments. It is a binding agreement, so your creditor cannot continue harassing you.
For those who are drowned in debts with their businesses shutting down, bankruptcy is the only viable option. It can get you rid of all your debts. Yes, it’s another legal process to settle your debts through the judicial system.
Simply file a petition for bankruptcy and hire an attorney to handle the legal process for you. The court is going to require a few documents including bankruptcy forms and financial statements, so your attorney will help you with all of them.
Lastly, I want you to stay motivated and devoted throughout the process. I know it’s a difficult time but remember that it will pass. Good luck!