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Between paying off your business loan, mortgage, credit card bills, and car loan, you may be drowning in debt.
Whatever the causes of your debts are – whether it’s accidents, overspending, or job loss, you have to be familiar with debt management.
Most people are dealing with different debts. If you have a large amount of debt, your goal is to pay it off, especially the ones with the highest interest rates.
Meanwhile, if your debt isn’t huge, your goal is to not let it go out of control.
What is Debt Management
Debt management is your best bet to get your debt under control through careful financial planning and budgeting. Debt management requires you to follow key strategies that will help you get rid of your debts.
There are many ways you can create a Debt Management Plan or DMP through the help of professionals, particularly credit counselors and other third-party providers. You can even do it yourself.
But how does it work?
The purpose of a DMP is to help you pay off your debt. If you plan on following a DIY version, the first thing you need to do is to make a list of all your debts.
This should include information about your monthly payments, due dates, and interest rates. Listing all your debts will give you a clear picture of how to pay them off. Make sure you check on this list regularly and update it whenever needed.
There are tons of tools you can use to make your Debt Management Plan more effective such as repayment calculators, financial management apps, and budget calculators.
If you want to take the extra mile, you can even negotiate with your creditors to decrease your interest rate or lower your monthly payments.
If you want to seek the help of a counselor, this professional can put together your budget, which is how much of your debt you can afford to pay off using money that is left after all your living expenses are covered.
You will make monthly payments to your DMP provider and they will take care of passing on the money to different creditors. Most DMPs are flexible and can be adapted to your income. It can also be changed based on your living expenses.
It’s important to note that although Debt Management Plans are a godsend for people who want to get rid of their debt problem, they won’t magically make all your financial obligations disappear.
Your bills will still come whatever your current financial status is. This is why you need to have enough income to take care of your existing bills.
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10 Tips to Get out of Debt in the Philippines
Managing your debt doesn’t seem like a big obligation if you only owe a small amount of money. However, you may find yourself dealing with more debt as your needs grow.
When faced with this situation, exercise these tips below.
Take your cards out of your wallet
If you’re struggling with credit card debt, the best thing you could do is to clean out your wallet. When your credit cards are not with you all the time, you will be less tempted to use them.
Don’t worry, this won’t be the case forever.
You can still enjoy your credit card the moment you’ve paid off all your outstanding balances. In the meantime, pay with cash and your debit card instead of your credit card.
This will not only ensure you won’t go deep into debt, but it will also teach you a valuable lesson about distinguishing your wants from needs.
Always pay your bills on time
If you have not made a structure on how to pay off your debts, you may miss some payments. Late payments will only burden you with penalties.
Make sure you have alerts for monthly payments. If you miss one, do not wait until the next due date to pay it. Instead, take care of it as soon as you can.
Prioritize your debt
Make a list of your debts – credit cards, mortgages, car loans, and even money you borrowed from your family or friends.
Then, list them in order of importance. Your vehicle and mortgage should be on top of your list because those are basic needs.
What’s less or more important will vary depending on your priorities. A lot of individuals want to cross out all high-interest debts first, while others want to get rid of specific debts immediately.
This list will ensure you stay motivated to pay all your obligations one by one.
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Limit your spending
The best tip to speed up your debt payments is to cut down your expenses.
First, track your spending for one month and find out where your money is going. You might be surprised to learn how much you spend on eating out, or online shopping.
After you see the aspects of your expenses that take up too many of your resources, assess if you can cut it down.
Choose bi-weekly payments for mortgages
Want to pay off your house faster?
Try splitting your monthly bill in half, and pay it every two weeks.
By the end of the year, you will make 13 monthly payments and you won’t even feel it.
This strategy may seem very obvious but it does wonders to shave off years off a typical house loan, depending on the interest rate.
Get a side job
If you want to pay off your loans faster, applying for a side job can be the ticket to success you’re looking for.
Take matters into your own hands and get a side hustle.
You can make money off your skill or passion. Depending on your schedule, you can have more than one side hustle.
Ask for credit card restructuring
Call the banks where you have credit card debts, and let them know that you are having trouble paying off your balance.
Try negotiating for a credit card restructuring.
Your bank might agree to extend your repayment term or lower your interest rate.
Set up autopay for business loans
A lot of business loan providers allow their clients to set up automatic payments.
This is more convenient compared to submitting your payment manually every month.
When your automatic payments are in order, you won’t have to worry about forgetting to pay.
Another option you can do is to schedule all your payments at once.
For example, if you have a business loan and car loan that is due around the same time, you can pick a specific date to pay these payments together.
Negotiate your medical debt
Medical debts are more common than you think.
However, do not take your medical bill at face value because chances are, it can be negotiated.
Speak with your healthcare provider, particularly the person who holds the authority to lower your bill, and tell them about your financial standing.
However, do not wait until your bill has been deemed delinquent before you do this. There are also organizations in the county where you can get medical assistance, such as:
- Philippine Red Cross1
- Department of Health Medical Assistance Program 2
- National Kidney and Transplant Institute 3
- DSWD Medical Assistance 4
- Malasakit Centers 5
- Philippine Cancer Society 6
- Hope from Within 7
Find financing options to manage debt
Handling debt is a crucial part of your journey to achieving financial freedom. Here are two options to help you manage your debt:
Balance Transfer Cards
These cards give you the ability to move all your debt to a 0% introductory interest card.
Therefore, you won’t have to worry about interest for a limited time. It’s very easy to apply for balance transfer cards in the Philippines.
For instance, Security Bank has an online application that doesn’t take longer than 10 minutes to fill up.
When taking out a balance transfer card, make sure you have a clear plan to handle your debt after the zero-interest period ends. If not, you may be stuck in a loop of paying large interests.
If you want to pay off your old debts at once, you can apply for a personal loan. This method will enable you to get your debt under control.
Consolidation can also streamline all your payments so you won’t have to worry about dealing with late fees that can affect your credit score.
By taking out a personal loan to pay off all your debts, you only need to make one monthly payment. This will enable you to free up your time.
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