Each of us can have not one, but many financial goals. Implement them with or without loans. The main thing is to be able to prioritize such goals and distribute them by timeline. If there is no such skill, then the goals may remain only in dreams or there may be debts on a loan.
Some people don't notice how debt snowballs on them. What's going on? The reasons for such a situation may be different for everyone, but the general behavior of people is noticed – at the first need, they borrow money from anyone: friends, relatives or banks. And without this, they can no longer imagine their life. However, the habit of living in debt is risky. After all, it becomes the primary reason that a person falls into the trap when he begins to take loans at interest in banks.
Is it possible to get rid of all debts? Yes, it is possible. But this difficult task requires, first of all, uncommon self-discipline and self-discipline from the debtor. Secondly, it is a detailed analysis of the personal or family budget. There are several other tools, like paying off debts and leaving the quality of life at the desired level.
Analysis, systematization, optimization
Detailed consideration of the budget allows you to manage your cash flows, adjust them in case of unforeseen circumstances. So, make a list that will include all your income, expenses, and debts.
1. Think about what you can sell to free up some money to pay off debts. Determine for yourself what you will not be able to save on (tuition fees, utility bills, etc.), and what fixed costs you can now reduce or even refuse them. Repayment of the loan, of course, refers to mandatory payments.
2. Sort debts by interest (from the largest). Your list might look like this:
- Microcredit or microloan (the highest interest rate; interest is charged daily, issued for a short period – most often up to 30 days)
- Consumer loan
- Car loan
3. Schedule your monthly payments to gradually reduce your total debt. To do this, carefully reconsider the loan agreement (or several): methods of debt repayment, schedule (number) of payments, sanctions for delays are always indicated in this document.
4. Introduce economy mode into your life. How? Plan your purchases in advance to avoid unexpected expenses. Look for discounts and promos. Reduce insignificant but daily expenses. Use a credit card with cashback (1-3% of the money returned for the purchase will give an opportunity to save). Pay for utilities using online banking without commission. Continue this list by analyzing your daily life in detail.
Interesting arithmetic. On cigarettes, according to GATS research (Global Adult Tobacco Survey – GATS, Kyiv International Institute of Sociology, Kyiv, 2017), a Ukrainian smoker spends on average about 500 UAH a month, on daily coffee on the way to work – about 400 UAH. Eating outside the home, bad habits, spontaneous purchases are also "hit" the budget. These are expenses that can be relinquished relatively painlessly.
5. Forget about new purchases on credit for the period until you have dealt with all the debts.
Журнал «Народний банкір» №15/2021
Re-lending or restructuring
Another relevant, effective tool in the fight against loan debts is obtaining a new loan to repay the previous one, drawn up in another bank, re-landing. You can take a loan for a loan on more favorable terms – to reduce the total amount of overpayment in interest or the size of the monthly payment. To do this, you will need a standard package of documents: an application, a passport, a TIN, an old loan agreement, a statement of payments, and a certificate of income from work or from the tax office. Be prepared for the new bank to check your credit history and debt status. So, having received a new long-term loan, the debtor closes all old debts, reduces the load on the real budget and gradually gets out of debt.
As for the restructuring, this step involves stretching the debt over time to reduce monthly payments in the same bank. Review the existing loan agreement with the bank manager carefully for the possibility of debt restructuring.
Growth in income and savings
Even in the status of a debtor, one can and should think about a "safety cushion" and an increase in income. Start earning more. First, find out about this opportunity at your current job. If the answer is “no”, start looking for more profitable vacancies or consider the option of a part-time job according to your skills and abilities.
Start accumulating gradually – save 10% of your income. An effective way to save money is to put money in a bank deposit. By nature, debtors usually find it difficult to resist the temptation to spend their savings, so it is better for them to put money on an urgent savings deposit (they give the highest interest, the impossibility of withdrawing money until the end of the contract).
Ideally, the size of your financial "safety cushion" should be equal to at least 6 months' salaries. The presence of such savings insures against unforeseen circumstances, adds confidence in the future, which is important for maintaining a positive overall emotional state.
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