Budgeting: Paying Off Credit
One of the most common reasons for budgeting is to pay off any outstanding debt. As interest is usually being applied to your credit commitments, it’s important to set up arrangements for them sooner rather than later. Otherwise you could end up owing much more in the long run. So what are your options when it comes to paying off credit, and becoming debt free?
Budgeting and Increasing Your Income
If you have a lot of outstanding debt and your income never seems to stretch far enough, you could consider either saving money elsewhere, or increasing your income. These options are not always easy, but they don’t have to be too complicated either.
If you create a budget, you can categorise your spending, and easily see the areas where you could make cutbacks. For example, you may find that you’re overspending on eating out, or perhaps you could save money by cancelling a subscription you rarely use. You can find our guide to creating a budget here.
You might not need to make any drastic cutbacks however. You may be able to save money just by changing the way you shop, or by switching your tariff or provider. For instance, you could buy fewer branded items in the supermarket, or opt for a cheaper tariff with your phone company.
In terms of increasing your income, this does not have to mean finding a second job. You could just pick up a few extra shifts or work a bit of overtime. Alternatively, you could try and use your talents to bring in more money – if you’re a good writer, for example, you could write freelance articles or blog posts. For those good at crafts, you may be able to sell items though sites like Etsy.
Speaking about your finances isn’t always easy. You may not wish to approach a friend or family member about your money problems, as it can be embarrassing to discuss. If this is the case, there are a number of independent third party companies you can speak to, that can offer free help and advice.
If you’re struggling with repaying your credit commitments, it may be helpful to contact one of the businesses listed below. They are all free to use, and completely impartial.
● People often decide to start budgeting to pay off debts and overdue bills
● You can create a budget to cut back on nonpriority spending, so that you can contribute more towards your debts. You may also consider ways to increase your income
● If you’re struggling with your debt, it’s usually helpful to seek expert advice. There are a number of free and impartial companies you can contact to discuss your options moving forward
● One method for paying off outstanding credit is debt consolidation – you merge all your existing loans into one large loan, to pay back less interest overall
Consider Debt Consolidation
Debt consolidation won’t be a great option for everyone. Before applying for a debt consolidation loan, it’s important to consider how much you owe overall, and how much you’re repaying in interest.
The principle of debt consolidation is to stop paying back interest on lots of smaller loans, and just pay the agreed interest rate on one larger loan. In theory, this should lower your monthly repayments, as well as the amount you’ll pay back overall.
Before applying for a debt consolidation loan, it can be a good idea to contact an impartial third party for advice. Both The Citizens Advice Bureau and The Money Advice Service can help you determine whether debt consolidation is the best solution for you, and recommend alternative options if not. Information can be found on their websites, and you can also contact them directly if you wish to speak with a financial advisor.
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