7 Ways to Pay Off Debt When You’re Broke

Anyone who is under debt knows that it isn’t easy, however, it is even much harder if someone doesn’t have enough money to spare for payments. There is still a way of paying off your debt even when you’re broke, but that requires financial changes in your part. Here are some tips from Nanaimo Bankruptcy Trustee Gareth Slocombe.

1.​ Create a budget if you don’t already have one.

A budget will come in handy when it comes to making better decisions regarding your money and will also give you an idea on how much money you can spare for your debt. It’s much better to manage your expenses on paper instead of your head because it will give you a bigger picture without having to count on your memory.

2. Make the distinction between broke and overspent.

Start making changes in the ways you spend your money to make room in your budget. If you are broke, do not make it worse by spending on things that are not essentials and you don’t need.

3. Put together a plan.

If you’re serious about paying off your debt, start everything with a plan. Begin with writing down your debts along with remaining balance and interest rates. It’s important to prioritize your debts, e.g. the highest interest rate debt first, lowest balance first, or another order. The plan is that you should pay as much as you can on a certain debt while paying the minimum on others. Some people allocate their tax refunds to debt payments each year.

4. Stop creating debt.

Cut your credit cards and stop applying for other loans so you will not be burdened with more debts. You will never get rid of your debt if you make more bad decisions by adding newer debts. New debts simply mean increasing the payments you make, adding additional strain on your budget. If you really are serious on reducing your debt, it is important that you find a way to live off of your income.

5. Look for ways to cut your expenses.

Review your spending, from your bank statements to receipts for each month. Try to prioritize what’s essential and what’s not. Remember that you are not cutting without any reason; you are doing it so you can pay off your debt. This way, you have to make sacrifices, however, you can add expenses back after paying off your debt.

6. Find ways to increase your income.

Finding another means of income will accomplish two goals. First, you will not have to use your credit cards to pay for other expenses. Second, you will have extra money to pay your debt. Increasing your income can be done by having a second job, selling things online, making money from a hobby, doing freelance work or starting a small business.

7. Ask your creditors for a lower interest rate.

The high interest rate is another factor that makes paying a debt much harder. Asking creditors or lenders to lower interest rates will help in reducing the monthly interest you are paying and will allow you to pay your debt much faster. Having a good credit score and good payment history will provide you leverage in getting lower interest rates. If your current credit card will not lower your interest rate, you can transfer your balance to a credit card firm that offers lower interest rates. And taking advantage of a 0% balance transfer is even much better.

Contact G. Slocombe & Associates Inc. in Nanaimo.