Personal Finance – 5 Proven Ways You Can Use to Manage Debts

Debts are sometimes inevitable; many people, not just in Kenya but across the globe, are caught up in its chain. The situation is dire and some people have been forced to borrow more to service existing debts. Well, this move has left many digging their own financial holes.

Kenyan statistics in February 2021 showed that over 14 million people had been negatively listed in the Credit Reference Bureau (CRB) for defaulting on loans from lenders. That makes it quite a significant number of individuals struggling to settle their obligations.

These types of financial constraints can be so big and seemingly unsolvable, but there is an easy way you can use to manage your debts before your personal finances strangle you.

Here are six proven ways you can use to come up with a successful debt-reduction strategy:

1. Consider How Much You Owe

First things first; how much do you owe? This includes digital lenders, individuals, and institutional bodies. The first mistake you will ever make is to stop paying attention to how much you owe.

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If you lose track of these amounts, you will end up paying the wrong amounts, not to mention hefty interests that will definitely leave you broke. Not keeping track of your debts effortlessly make you miss important dates. So, always know how much you need to pay and when the grace period will run out.

2. Prioritize Your Debts

We all got bills to pay and other needs that take preference, but with any income you get, don’t keep paying the small amounts without considering other amounts you owe. Instead, prioritize your debts and ensure that you are paying the larger amounts to these creditors.

For instance, if you owe someone a small amount of money, but you have already settled it, don’t fret over paying off another debt with a large amount. This will worsen your financial situation, not to mention how frustrating it will get.

3. Think About Consolidating Your Debt

This is an area that many people aren’t quite privy about. Still, it remains another excellent way of managing your debt. Debt consolidation allows you to create a single payment plan with a single creditor who has a lower interest rate than the ones you are currently paying off.

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With debt consolidation, you can pay off several small loans with the help of one large loan. This will allow you to save money, and best of all, the interest rates on such plans are often lower than those other creditors offer.

While this option is not for everyone, it certainly works for those who are struggling with managing their debt and want to get rid of it.

Therefore, find a debt consolidation plan, calculate how much it will save you, and start paying off your debts. Above all, ensure that the amount is enough to pay off all your other debts.

4. Pay Off Early

Creating a debt management plan is only effective and viable if you pay off your debts early. This is paramount, and you should never forget it. If you are trying to consolidate what you owe, ensure that you are paying more than the minimum amount every month.

If you have more than one lender, settle one debt as soon as possible so that you can focus on another one. Also, it is unwise to use your credit card, if you have one, to pay off debts. Leave it at home. Only use cash.

Paying your debts early will help you significantly reduce the period of time it will take for you to settle all your other debts.

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5. Avoid Defaulting

Yeah, don’t default. If you are not among the ones who have defaulted by now, don’t go on starting. This will only make things worse for you if you are already having problems with managing your debt.

Defaulting makes things worse by rendering your situation much harder to fix. Instead of defaulting on your debt, try and make it easier for yourself by using some of the tips above.

That said, also ensure that are avoiding certain things that can make your financial situation worse than it already is. Hopefully, these tips will help you get the hang of how to keep your finances in control to retain a perfect credit score.