It’s very easy to get a loan, but it’s much harder to pay off your creditors. As practice shows, you can get out of the deepest financial pit, if not despair.
Our advice and methods will help you to pay off even large debts: to repay the debt correctly, to find money to pay, to choose the best way of payment.
How to repay a credit card debt
Talking to the creditors
In no case should you be missing, reset calls and ignore email notifications. As soon as you feel that the situation is critical, and you will not be able to repay the loan in time – inform the creditor about it.
Make it clear that you are not going to deceive the bank, you have paid the loan correctly until specific circumstances arise, and you are going to pay off the amount you can on a regular basis. No one is interested in lengthy litigation, on the contrary, you are likely to be met.
You may be offered a reduction in interest rates for some time, or even a cancellation of some late fees, or a rescheduling of payments. All of this will help you move forward, and optionally your credit history will not suffer. Of course, you should stop using your credit card and fix the debt so that it does not increase.
- Tell them you can’t pay anymore.
- Record the debt.
- Try to ease the conditions.
The bank is as interested in repayment of the loan as you are. There are cases when banks can close a loan even at a loss, and it does not affect the credit history of the client – the usual business process of cost management.
More than the minimum payment
Credit companies and banks love it when you pay exactly what you need. It seems to you that you are paying off a loan, though gradually, but in fact your debt is only increasing at the expense of interest.
If you pay even a little more, it will be more profitable, as it will shorten the payment period. Experience shows that about 10% of your income is spent on random things, so try to deposit them into your credit account right away.
By the end of the year, you will be able to pay only 60,000-70,000, and interest will be charged on the balance of the debt. In fact, the minimum payment is arranged in such a way as to make your loan as long-term and profitable for the bank as possible.
If the minimum payment is made with small but overdue payments, it can be used to pay fines, overpayments, penalties and current interest. You will pay, but the debt will not be reduced at all.
- To close the card in less than a year, make a minimum payment of x1.5-2
Plan your budget
I’m sure there are things you spend more than you need to, considering that this minimum amount will do nothing. What can a cup of coffee change if you need to pay off a car loan?
This sounds naive, but record all your expenses and you will see where you can save money. No fantasy, but even a small amount will be enough to cover the interest payments, and besides, pay a little more than the minimum payment. This is exactly the money you spend on nonsense.
- Optimize costs
Try to increase your income and prioritize
There’s no general advice here. Some may take more working hours or days, others may work longer and receive a bonus. Some people make money with their skills and hobbies. Take on any temporary work, look for part-time jobs, you need to improve your financial situation.
There is a car – get a driver in a taxi. You can try to sell unnecessary things. You can buy anything from an old washing machine to a broken baby bike. What has been dusted on the balcony for years can bring you $20-$50. Already enough for a minimum payment.
If you’re saving money for training, you might want to spend it now, postponing plans for a year. If you have two cars in your family, you can sell one of them, so you will not only get a large amount of money, but also will not spend money on gasoline and maintenance, garage rent.
Riding on public transport is more inconvenient, but cheaper. Try to give up hobbies and hobbies, it will free up a certain amount of money every month and allocate time for part-time work.
- Build cache: new revenue = new credit opportunities.
American debt cancellation techniques
First of all, with the highest rate
It would seem that this is obvious, but many people try to repay small loans first to pay off at least part of it. In this case, you are overpaying the interest on the service, so the total amount is higher. For example, you have one loan at 13% p.a., the other at 10%.
With the same amount of credit, focus on paying off a 13 percent loan, paying off another minimum amount.
You will have to pay the interest anyway, but you will do so less.
If the amounts are different, you will need to adjust the interest rates to these amounts. Let’s assume that we have two credit cards: Alfa Bank, with a debt of 100,000 to 25.9% and Sberbank with a debt of 80,000 to 19%. We bring the rate of Sberbank to the rate of Alfa-Bank:
19*(100/80)=23,75%. That is, the main efforts should be made to repay the loan in Alfa-Bank.
If we assume that the amount of debt in Alfa-Bank is 50 thousand, the rate of Sberbank will be 19*(80/50)=30.4%, which makes the repayment of this debt a priority.
- Count the credits: Pay off the ones that are profitable, not the ones you want.
If the accrual on several loans is approximately equal
Reverse method: If you have more than one loan with equal charges, repay the least. This is the so-called “snowball method”: repaying one loan motivates you to repay the next one, and you reduce the number of loans.
Most people find this easier and they subconsciously lean towards this method. Note that if you are at risk of confiscation or one of the accrual loans is clearly larger, this method is excluded, repay the larger loan as described above!
- In case of equal debts, try to close a particular loan
Restructuring and refinancing
If you have taken a large amount of money to develop your business or buy an apartment, and you have paid at least a third, you can ask for a restructuring. It is beneficial if the bank now gives loans at lower interest rates for the same purposes.
You may be able to meet this challenge and get not only a reduction in your total debt, but also an extension of the term for the new loan. That is, you can take advantage of the restructuring to reduce your monthly payment by extending the total loan term.
Restructuring makes sense when the interest rates are significantly different, as you will have to pay commissions and some other payments when applying, so carefully calculate the benefits.
By the way, not all banks agree to refinance their own loans, so you can try to sell the loan to another bank. For example, VTB24 and Sberbank are refinancing mortgage loans. Raiffeisenbank can refinance both its own and someone else’s car loans.
- If you can’t pay, restructure: restructuring will bring everything together in one payment and reduce the monthly amount.
Repayment from other credit account
If you want to repay a loan from another credit card on which you do not have a debt and have a certain amount that you can use, make sure it is profitable.
Even if you can use 0% of the amount, there are always commissions associated with transfers, so you will lose some of the money but increase the number of credits you have to repay at the same time.
If you choose this method, divide the debt into the number of months that an interest-free loan lasts and make sure you have enough money to repay it.