Resolve Your Debts on Your Own
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Before seeking the help of a credit counselling organization, Licensed Insolvency Trustee or financial institution, you may decide that you would rather first try tackling your debt on your own. This may be for reasons such as wanting to maintain your credit score, or simply because other options are not easily available to you. Whatever your reason, below are some strategies that can help you pay off your debts faster without seeking professional help. These methods can also be used in combination with professional debt solutions in order to become debt-free faster.
Strategies to pay off your debts faster on your own:
- 1) Contact your creditors for assistance
Your creditors may offer their own internal hardship programs for customers such as yourself, who are experiencing difficulties with payments. It doesn’t hurt to call and find out what they can do to assist you. They may be able to offer you relief in the form of a reduced interest rate, or the option to transfer your debt to a lower interest rate product. These programs are more likely to be offered by major financial institutions such banks, and are easier to access before you start falling behind on minimum payments. - 2) Increase income to pay off debts
Working extra hours or taking on an additional part-time job can be tough, but it is an effective way to pay off your debts. Stay committed to putting all additional funds earned toward your debts, knowing that the situation is just temporary until you are debt-free. This option is especially effective if you are still paying interest on your debts, because paying them down faster will save you money on the interest charges and overall balances. - 3) Cut back on expenses to increase monthly debt payments
Have a careful look at your budget and identify any areas where your monthly spending could be cut back. Can any of your expenses be reduced or eliminated altogether until your debts are paid in full? Come up with a goal for how much you want to put toward debt repayment each month, and try to trim down expenses until that goal is met and your debts are paid off. If you are not sure how to create a budget or calculate your expenses, check out our Simple Guide to Creating a Monthly Budget for help! Some common expenses that people cut back on during debt repayment include clothing, entertainment and eating out. These are personal decisions, as only you can decide what spending adjustments will work best for you and your household. - 4) Take out a person loan
Borrowing money from a family member or friend to pay off your debts can have many benefits to you if this option is available. You may receive a much lower interest rate than a financial institution would give you, especially if your credit score is poor. You may also be given more flexible and affordable repayment options based on your current situation, than with other debt relief options. To avoid future disputes, a formal, written agreement should be made, including details of the interest rate to be charged and monthly payment amounts to be made. A structured payment plan should remain in place until the personal loan has been paid back in full. - 5) Downgrade or sell personal assets
Consider trading in any valuable assets you have, such as a vehicle, furniture or jewelry for cash to put toward your debts. If you are still making payments toward your vehicle, you can try trading it in for a lower model with more affordable monthly payments, if possible.
If you are willing to make the sacrifices and commitment required to pay off your debt, taking matters into your own hands can be just as effective as seeking professional help, and may even have a better impact on your overall credit rating. However, there can also be dangers associated with trying to manage your debts on your own for too long. If any of the following warning signs of debt trouble apply to you, it may be time to seek help from a professional regarding your debt.
Warning signs of debt trouble
- You are only making the minimum monthly debt payments
- You are receiving collection calls or letters
- You are borrowing money to make your monthly debt payments
- You have applied for new credit and have been declined
- Your credit card balances are maxed out
- You are constantly worrying about your debt
