Workable Strategies for Controlling and Leveraging Personal and Commercial Debt
Debt may feel overwhelming, personal or business. But with the right strategies put in place, you can regain the control that you have of your financial readiness and begin to reduce the debt. In this post, we’ll discuss easy and effective methods of managing and consolidating personal and business debt. By doing this, you will be moving on your way to being debt free and having more financial stability.
Managing Personal Debt
Personal debt can originate from any number of places; credit cards, student loans, medical bills or a personal loan. Some of the key strategies to use, in helping you manage and decrease your personal debt include:
- Make a Budget and follow your spending.
Understanding how one manages personal financial situation is the first step in managing one’s personal debt. Prepare a detailed budget that lists all the money you are going to receive and all that you are going to spend. This will show you what your money is being spent on on a monthly basis.
As soon as you set a budget, monitor your expenditure to check that you are adhering to it. We are trying to get as much money as possible in order to repay your debt. Cutting waste in form of eating out or even subscription fees you are not using can be helpful.
- Prioritize High-Interest Debt
If you have more than one source of debt, try and pay off the dollar debts with the highest interest rates first. This strategy is called the debt avalanche method. To save money on the interest in the long term, you need to pay off high-interest debt first.
For instance, if you are indebted in credit cards with an interest rate of 20%, first pay off that one and then move on to lower rates such as student or personal loans.
- Use the Debt Snowball Method
Another method to clear debt is the debt snowball method. Using this approach, you pay off your smallest debts first, irrespective of the interest rate. When you pay off the least debt, follow it with the next smallest, then so forth.
This method won’t save you as much on interest but gives you quick wins and motivates you to continue because you see your debt disappearing.
- Consider Debt Consolidation
Debt consolidation is based on the idea of consolidating several loans into one loan and at a lower rate. This can ease indebtedness management by cutting the number of monthly repayments you make. You can consolidate debt using:
- An individual loan from a bank or credit union.
- Credit card for balance transfer with 0% introductory APR.
- A debt consolidation loan from a dedicated company.
By consolidating you can enjoy more simplified payments and lower cost of interest thus enabling you to pay off your debt faster.
- Negotiate with Creditors
Creditors sometimes are willing to work with you to improve upon this less manageable payment schedule. If you’ve got trouble making payments, call your creditors and ask for:
- A lower interest rate.
- Extended payment terms.
- A reduced monthly payment.
Most creditors are willing to these negotiations to avoid defaulting, and that’s worth a call if you need an assist.
Managing Business Debt
Business debt is an issue that both beginning and expanding businesses often face. And there are strategies, specifically for dealing with and consolidating debt of a business:
- Review and Restructure Business Expenses
Similar to personal debt, the first thing to do when working with business debt is to understand your cash flow and expenses. Output all your business expenses and see where you can save on costs. This may include renegotiating supplier contracts, cost cutting on overhead, or eliminating non-essential spending etc..
With better cash flow, you’ll be able to dig deeper into your pockets to achieve debt pay down in the business.
- Refinance or Consolidate Business Debt
Recycling debts of business can contribute to decreasing your interest rates and extending the terms of your debt repayment decreasing your monthly payments. This can free money for other parts of your business.
On the other hand, another way of managing your finance better is to consolidate several businesses’ debts into one loan. Research into options such as business consolidation loans and lines of credit that offer an interest rate that is lower than the interests of what you carry as debt already.
- Increase Revenue Streams
The easiest way to control your business debt is by improving your income. This can include the introduction of new products, the expansion of services and / or higher prices where necessary. You may also find new sales channels of marketing strategy to attract more customers.
The more you make in turnover, the more straightforward it will be for you to save the debt and run a successful business.
- Consider Debt Settlement
If your business is in dire financial straits and you can’t afford debt repayment, debt settlement may be a solution. This is through engaging your creditors who will hand you your debt off for a lump sum that’s less than what you owe.
Debt settlement should be a final option as it can hurt your business and the letters with creditors. However, in some cases it can help you to remove part of your debt and start anew.
- Build a Strong Financial Cushion
Whether it be personal or business finances, having an emergency fund can help you prevent yourself from getting further in debt. For businesses this means reserving money to cover unexpected costs, slow down periods, or new prospects. There is peace of mind in a good financial cushion and you cannot incur further debt.
Conclusion
The maintenance and consolidation of debt, whether personal or business, needs a strategy, discipline and patience. Budget, prioritize debt repayment, consolidate and negotiate with creditors and you can become stress free from being in debt and work towards debt freedom. You should know that the objective is not only to repay debts but also create a solid financial base for a future.
The earlier you begin making decisions that will move you toward managing your debt, the sooner you’ll be able to reclaim your finances and pick up from there with assurance.
