If you are reading this, it is because you know that one of the priorities to achieve your financial well-being is to solve your debts. In that case, congratulations! You are going one step further.
Now, if you have also crossed the idea of requesting a loan to pay debts but it turns out that your debt is too small to be refinanced, do not worry, in fact this is something you can take as good news.
If you are dealing with a small debt, it means that you still have the ability to resolve it on your own. In a few moments we will tell you how, but first …
Why don’t I have a loan to pay off debts at an early stage?
Remember that applying for a loan to pay off debts is an excellent strategy, as long as this loan offers you better conditions, which can be reflected in commissions, terms and interests.
However, it is difficult for the loan market to find suitable alternatives to resolve debts of less than 6,000 dollars. If you find it, we suggest you first check if the interest rate will not end up making your debt more expensive.
Now, how to pay debts of small amounts?
1. Identify your debt
It is not enough to have the quantity clear. Write in your agenda, or in any other space, how long you could and should pay your debt. Being such a small debt, you may have to pay it this month.
If you don’t think you can collect the money on time, at least identify how much would be the minimum you should pay to not generate interest . This amount can be found in your account statement or by entering from your bank’s site or application. Just don’t get confused with the minimum payment suggested by the bank because you will open another door to increase your debt.
2. Rearrange your budget
The first step is to know how much goes in and how much goes out of your account each month. The second is to identify the categories of each of your expenses. If you are already clear about your monthly budget, then you can go directly to the third step: readjust your budget.
Changes in your budget should be consistent, so avoid taking your fixed costs at all costs. It makes more sense to start by taking your expenses for fun, leisure or entertainment.
It is also not recommended that you take your savings, but maybe you are saving for something of less urgency like a television. In that case it is at your discretion if it would be better to take part of that savings to pay off your debt.
3. Generate extra income
As we have already mentioned, a small debt usually has a very small term to settle it. So, in this case, the suggestion is not to change jobs overnight.
Some ideas to bring more money into your pocket and resolve your debt include:
- Put your skills and talents to develop a project on your own
- If you are a freelancer or business owner, think about how you can maximize your sales or get extra projects for this month.
- Take a temporary job during weekends. It can be as support in events or selling products in a bazaar.
- Ask for extra hours at your job. As long as they pay you.
- Sell your products online.
- Support a friend or relative in your business, whether they pay you for hours or commission.
4. Go to your emergency fund
Your debt may be the result of an unforeseen event that you had to pay by card and consider that being too small is no reason to take from your emergency fund.
It is very good that you do not want to resort to your emergency fund because of the temptation to turn it into your “debt fund” but it is worthwhile to apply your criteria again and identify if this debt qualifies as an “emergency”.
5. Borrow from someone you trust
Rather, borrow someone from EXTREME trust. We leave this option until the end as many finance experts recommend avoiding it. This is because loans between trusted friends and family can cause several problems.
If you have already tried the other options but the urgency to pay is too much, consider the following before asking for support from someone you trust:
- The trust must be mutual, so you must also give that person confidence that you will return their money.
- Do not ask for the full amount. If you tried to follow the first points surely you will not need to borrow everything. Ask for the minimum payment so as not to generate interest.
- Define agreements regarding payment terms. Treat this like any other loan to pay debts, being timely and consistent.
6. Consolidate your debt
Perhaps it is not that your total debt is very small, but that it is part of a larger debt distributed among more credit cards. In that case we recommend the option of consolidating all your debts under a single loan to pay debts.
If you already tried to request your credit Jekyll but the amount of your debt was very small, we recommend you try again but this time include all your debts in your application.
You already realized that getting out of a small debt is easier than you think. You just need to put all your desire, effort and ingenuity to achieve your goal even without a loan to pay debts.