Personal Finance-Four Ways to Pay Off Debt

April 21, 2009 by  
Filed under Personal Finance

One problem that most people are having trouble facing is debt. People just owe so much money to their debtors and they do not know how to even repay it with all the expenses they have. Now, with the current financial crisis, the obligation is even harder to meet. But it is necessary that you sort out your personal finances before it’s too late. Below is a personal financial advice on the ways you can pay off your debt for a brighter financial future.

Tip # 1 Pay More than the Required Minimum Amount of Repayment
The best way to get rid of debt is to break the habit of paying only the minimum month after month. This does not do you any good. In fact, you are only prolonging the agony. But needless to say, that is exactly what financial institutions want you to do because the longer it takes you to repay your loan, the more interests they gain from the loan they gave you. And yes, you have the money to cover more than the minimum. Examine your spending habits closely and see where you can cut back in your household finances.

Tip # 2 Take a Loan against Your Life Insurance
If you have life insurance with cash value, a good personal financial advice to eliminate debt would be to borrow against it. In reality, you are borrowing your own money at significantly lower rates than when you do from banks. A good thing about this is that you can take your time when repaying the loan. Just make sure though that you do repay it so that your beneficiary will get the entire face value in case something happens to you.

Tip # 3 Borrow from Your Family and Friends
One way to improve your personal finances is to borrow money from your family and friends to pay for any outstanding debt you may have. Doing this will give you favorable interest rates and a tolerance for late payments. But if you want to maintain good relations, make sure that you keep everything in order by making a written agreement to keep both sides protected.

Tip # 4 Renegotiate with Your Creditors
This should be your last resort before filing for bankruptcy. You have to let your creditors know your situation, and try to renegotiate terms with them. If they aren’t amenable to this arrangement, inform them that you will be filing bankruptcy if all else fails. Ask for lower interest rates and longer repayment periods.

Follow these steps and become debt-free in no time. It can also help if you increase the amount of money you put into paying these debts by looking for a source of passive income. Be in control of your personal finance now and enjoy its benefits later.