$850,000 of Total Debt. What Should I do?
$850,000 of Total Debt. What Should I do?
For most people, having a total debt of $850,000 means that you have a long-term problem. Also, such a massive debt will diminish your net worth. It is only after making some payments that the net worth will start rising again. BitGale has some tips for you in the case that you have a total debt amounting to $850,000.
Stop being in debt denial
Many people accumulate more debt thinking that carrying debt is a normal thing. Hence, they start buying things through financing options. It only serves to increase it.
Others hold the opinion that having debt is not okay. However, instead of remedying the situation, they spend the money that would have helped in making repayments to get stuff they do not require. You are likely to find them searching for a new TV, ordering things online, or even dining out at fancy restaurants.
List all your debts
To understand the total debt, identify all the balances and their interest rates that you owe. Also, include the minimum payments demanded by every entity. Knowing where the $850,000 is coming from is the first step to being rid of it. Additionally, you will get to see the amount of time you have before this debt increases and by how much.
Come up with periodic goals
Having goals is an essential practice in every aspect of life. Goals are instrumental in the fragmentation of tasks into manageable ones.
When you decide to clear this debt, you will assess the amount of money you can pay each month. You can then identify the duration it will take to offset it completely. Having this rough estimate in mind will help in knowing the period that you will have to endure this burden.
With a goal in place, it is unlikely that you will ignore it. A good goal for you would be to have the $100,000 mark as your goal. It will push you toward realizing your objectives more speedily than you would have imagined.
Begin with the loans with the highest interest rates
Paying the loans with the highest rates and working your way down is the prudent thing to do. You should also endeavor to make the minimum payment for the other loans. Nevertheless, focusing on the debt that is accruing the most interests helps to ensure that you do not lose as much to such fees.
Clearing debts helps to generate more funds to cover the rest
After offsetting one debt, your disposable income increases. The freed up cash can then be used to augment the paying of the other debt that takes precedence. Then when that one is done, you keep the trend going.
Trade in some items
If you have a shiny, almost new car in your garage, you can trade it in for a cheaper option. The extra cash that is generated can then be used to clear the debt. This generation of more funds can be multiplied if you get a cheaper car by trading in at least two of them.
It can be applied to other shiny modes of transportation that you could have in your possession such as yachts, boats, snowmobiles, or jet-skis among many others.
Sell whatever you do not need
After trading in the items listed above, you are also left with other stuff that can be sold even though they will bring in less money.
Many people have become accustomed to filling their houses with useless stuff. You could take a notebook and note each thing that you use frequently. Anything that fails to reach this classification can be sold to aid in clearing the debt.
Work harder
More money will be needed to ensure a faster clearing of the debt. You can thus do overtime, look for a second job, or even babysit.
Consider seeking professional help
There are many reputable entities that deal with debt counseling. Contracting a credible one will ensure that you are assisted in managing your finances in addition to the repayment of this debt. Therefore, do proper research before seeking assistance.
The counselor will critically assess your situation relative to the information you avail about the debt, income, and expenses. Availing accurate information will help in getting the best advice.
He or she will then provide recommendations that you can follow to get you out of this problem. A debt repayment plan will be crafted that will enable the reduction of this debt besides restricting the accumulation of more liabilities by limiting the use of any credit cards. Alternatively, you could be advised to file for bankruptcy if your finances show that you are unable to make any payments.
You will then be given an ongoing plan to augment your financial situation.
In summary, with these tips in mind, you can now come up with a comprehensive plan on how to reduce to the $850,000 total debt and live a debt-free life after its repayment is over.