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best debt management actions


Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt management is key and that is the focus of this article.


Debt is used by many individuals as a method of making bigger purchases that they cannot afford at the time the need arises.


Oftentimes debt is expected to be repaid with a certain interest. Common forms of debt are loans, including personal loans, auto loans, mortgages and credit card debt.


There are terms of loans which are; date for repayment of a loan, interest to pay on the loan expressed as a percentage of the loan amount.


The interest on loans serves as compensation to the lender for taking the risk on the loan and also encourages the borrower to repay the loan quickly in order to limit its total interest expense.


It is important that you keep up your payment and make sure it does not get out of control, debt management education comes in handy here.

1] Workout debts that you owe


Trying to figure out the best debt management actions, a good starting point is to make a list of how much you owe and to which providers, and how much you pay in fees and interest.


While this could be unpleasant, it helps to get a realistic view of exactly how much you have to pay back, and how different interest rates and provider fees can affect the amount you have to pay.

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2] Build an emergency fund


Without access to savings, you’d have to go into debt to cover an emergency expense. Even a small emergency fund will cover little expenses that come up every once in a while.


First, working toward creating a small emergency fund is a good place to start. Once you have that, make it your goal to create a bigger fund.


Eventually, you want to build up a reserve of three- to six months of living expenses.

3] Seek a better deal


High-interest rates and added fees can really affect how much you pay back on top of the principal amount (the base amount you owe).


If you have a loan or credit card, you could save money just by using comparison sites to shop around and see if another provider can offer you lower interest rates and fees, or more suitable repayment conditions.

4 ] Pay your debts on time


Late payments make it harder to pay off your debt since you’ll have to pay a late fee for every payment you miss.


If you miss two payments in a row, your interest rate and finance charges will increase. Time management and debt management often go hand-in-hand, and paying your debts on time can prevent you from accumulating additional expenses from late fees or interest charges.



Consider setting up alerts to remind you when payments are due, or paying by direct debit on a monthly or fortnightly basis.

5] Compare what you earn, debt and expense


In addition to having a realistic view of how much you owe, it can also help to have a realistic view of how much money you have coming in and how much money you are spending.

Create a budget and jot down:


  • Your money coming in (such as income from your job or extra money from things like investments)
  • how much do you need for essential expenses like rent, groceries, and bills
  • any additional spending you have on non-essentials, like pay-TV or eating out
  • the amount you have leftover (if any).


By doing this, you can identify where there may be room for movement and where you could save a little bit extra here and there to add to your repayments. Saving a little extra helps in debt management.

6] Take a sound decision on which debt to pay first


Paying off credit card debt first is often the best approach because credit cards have higher interest rates than other debts.1 Of all your credit cards, the one with the highest interest rate usually gets priority on repayment because it’s costing the most money.



Use your debt list to prioritize and rank your debts in the order you want to pay them off. You can also choose to pay off the debt with the lowest balance first.


This might cost a little more in the long run, but knocking off small debts first can build confidence.

7] See if you can make extra repayments


One of the common debt reduction approaches is to make extra repayments on top of your regular repayments.


Making extra repayments can help you pay off what you owe at a faster rate, and you’ll typically pay less interest. Depending on what you owe, this could help to save lots of money.


Before making extra repayments, it can be useful to look at the conditions of your loan, as some lenders might charge you for paying off the debt early.

8] Seek help in difficult times


If you find it hard to keep up with your repayments, consider calling your providers as soon as you can to tell them you’re experiencing financial hardship.


Some providers have a provision for bad debt, and there may be people within their organisation who can help with your situation and work with you to find an alternative payment plan that could assist you during tough times.



Debt management is important so that your debt does not get out of control.

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