The Asquith Group Asia, Tokyo Japan on How to get out of debt in five ways Edit Title

How would you like to get rid of your debts? Who would not, especially if you have a very limited budget? Many get frustrated when they have to let go of their precious money only to make loan payments. Money merely passes their hands, leaving them nothing to spend or even save. And much of the money paid often goes towards paying high-interest payments.

In spite of all that, you are better off paying just a small amount instead of not paying anything at all. But if you have no emergency fund, have a difficult time getting by and cannot sustain bills, then it is time to face the issues frontally. For those who have some money, by all means, pay off your debt. For those with limited budget, follow these five ways to do away with debt:

1. Make a plan for paying off a debt

Making a monthly budget

If you have a very limited budget, you need to make a plan for paying off a debt. Begin by listing down all the people you owe money to and how much you owe each, then add up to find out exactly how much debt you have. Arrange your list according to order of importance, considering the amount you owe, the interest rate and the terms of the loan.

Now you can calculate the amount you are capable of paying monthly. Use Bankrate’s debt pay-down calculator for this purpose. Knowing how much you can pay, determine how you will distribute the total figure to every loan. Prioritizing a high interest loan for full payment may be beneficial; however, a loan that is not due and demandable any time soon (like a school tuition loan) should be considered for later payment so you can initially pay off other loans.

One other vital consideration if you have a large debt is to meet your lenders and negotiate a repayment plan which may lower your payments or secure more advantageous loan terms.

2. Go for automatic payments

With a small budget, you may think a negligible payment will not amount to anything. Nevertheless, any small amount is better than nothing. Avail of automatic deductions in order to avoid falling into the habit of giving so many excuses to default on your loan payments.

You have to take into account any amount of money that is automatically deducted regularly each month from your bank account when you do your budgeting. You can then avoid overspending or paying penalties by the spending that money that has been allotted to pay off a debt. Stick to the plan once you have gone automatic.

Automatic deductions can be an effective way of paying bills; however, NOLO recommends that you inspect for errors in your accounts. In case late automatic deduction occurs or a payment is not made by the bank (or the bank keeps deducting even if you have told the bank to stop doing so), you might encounter problems. It is very important to check your account regualrly.

3. Reduce Expenses

Although it follows without saying, with a small budget, you cannot hope to pay off a debt if you do not find ways to reduce your expenses. Otherwise, it will take you forever to eliminate your debt. Evaluate your monthly expenses and find out where you can implement some changes. Decreasing or eliminating some of your expenses will free some money for paying off your debt. If so, you could be cooking meals at home instead of eating out at restaurants, watching regular TV shows and not cable shows or jogging around the neighborhood instead of doing the treadmill at the gym.

In case your budget will not allow you at all to cut expenses, you may have to bite the bullet in order to get out of debt more rapidly — cut off some expenses for the sole purpose of paying off your debt. Even a small act as making your own bread or yogurt at home, instead of buying them, will go a long way to help you on this goal.

4. Revamp your spending pattern

This approach may seem to be the same as the previous; however, it is not. Getting into debt rarely, if ever, arises from an accident. Having a home mortgage or an education loan is a given for most people, being legitimate needs that they are. But sometime in the past, you must have made some decisions that brought you to where you are now. As such, you might have to evaluate your spending habits and resolve to get out of debt as soon as you can.

The consequence, therefore, is becoming more responsible in paying off a need, such as a home mortgage, by giving up some wants -- for example, buying a more expensive car. Limit your credit card expenses if you have an existing debt, that is, wait till you pay off a debt before spending even more and increasing your debt. It is no longer a matter of being a conscientious spender or an impulsive spender, but deciding to be debt-free by not spending any more using your card.

5. Seek assistance

Feeling frustrated or overwhelmed by your debt? Get the help of a credit counseling agency to guide you how to get out of the slump. Check out the National Foundation for Credit Counseling to help you begin the process of recovery. Getting free advice or for a minimal cost may just be the answer to your present financial issues, teaching you how to handle your money and also how you can come up with a strategy.

How about borrowing money to pay out a loan? There are some benefits to doing that. Having several various loans may allow you to consolidate them. But be careful of the interest rate and the devil-in-the- details of a new loan you plan to acquire. In particular, an unsecured short-term loan should be avoided as it is quite risky. Consider seeking the help of relatives for help to pay off your debts at zero or minimal interest rates, as long as you can agree on the payment terms.

The burden is upon you to make these tips work to help you in your situation. Remember, a limited budget is not an obstacle to paying off debts, although it can be quite challenging. Take the challenge now!

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