There is nothing intrinsically wrong with being in debt, so long as the burden you’re shouldered with is affordable.
Things can get out of control when interest rates rise, leaving you unable to keep pace with repayments, which is the first step on a downward spiral into financial instability.
If you’re looking for a solution to this scenario, there are actually several ways to restore order to a chaotic debt situation, so let’s talk about your options to help you decide how to proceed.
Take out a low-interest personal loan to consolidate your high-interest debts (e.g. credit card debts)
Credit card debt is often the culprit behind high interest repayment calamities, because plenty of people sign up to deals without realizing just how much they’ll have to fork over each month to cover the interest alone after making a major purchase.
That’s where debt consolidation emerges as an attractive proposition. It’s a process as simple as taking out a personal loan which you use to pay off your outstanding credit card balances, giving you a more manageable monthly repayment in place of several sky-high ones.
Attractive interest rates attached to SoFi’s personal loans make them an appealing prospect in this context. Just remember to point out that you’re using your personal loan for debt consolidation when you apply.
Rebalance your budget to pay off your debt sooner
The issue with interest is that it compounds over time, so the longer you leave a debt on the table, the more you’ll fork out to cover interest that’s accumulated.
The answer is to increase your repayments and get to the finishing line sooner rather than later, which is achievable if you rethink your personal budget.
Find unnecessary expenses that you keep accommodating each month, and eliminate them, redirecting the cash to deal with high-interest debt.
It’s also worth reining in your spending habits and living frugally, if only temporarily, to make a major dent in your debt.
Transfer your balance
Assuming that your high-interest debt is attached to a credit card, you could benefit from moving it from your current provider to a new deal with a rival company instead.
This is similar to a debt consolidation loan, but means that you still have the option to use your credit card to make purchases, and don’t need to commit to a set number of monthly repayments over a given period.
Balance transfer deals are ten a penny, and often come with incentives and perks to bring new customers onboard. For example, you could be charged nothing for carrying out the transfer, and you should enjoy low or no interest rates for an introductory period after making the switch.
This won’t be a permanent solution if you don’t also make an effort to pay off your credit card debt once it has been transferred.
Also bear in mind that if you’ve got bad credit history, you won’t be offered the most favorable rates if you decide to switch providers.
File for bankruptcy
This is a last-resort option for dealing with debts that you cannot afford to pay, yet one which may suit certain people.
Two main types of personal bankruptcy exist, with chapter 7 bankruptcy requiring you to liquidate your assets to pay down debts, while chapter 13 bankruptcy lets you keep your assets so long as you’ve got a decent salary and can agree to a repayment plan that debtors also approve.
Wrapping up
Getting the advice of a finance expert to fight back against high-interest debt is worthwhile if you still don’t know where to turn. Just remember that there’s always a way out of serious situations like this, and there’s always hope.
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