(Newswire.net — June 29, 2020) — Millions of Americans have been thrown into a financial tailspin by the recent pandemic. Some industries have been ordered to close and are unable to reopen for the foreseeable future. Many other companies have had to lay off employees or restrict the payment of salaries. For people impacted by the pandemic, they may be in a severe amount of debt that they have not had to face before.
A person may notice that it would take months or even years to pay off their debts at their current income. They start to panic. Some people hide their credit card bills in an effort not to think about them. But these strategies are not effective at solving the problem of rebuilding shattered finances. Instead, individuals have to work hard and think about their debt situations in order to formulate the best response.
Start a debt payment plan
According to Coral Funding, one of the best ways to start rebuilding finances is by crafting a plan to fight debt. Many individuals are simply overwhelmed by the debts that they have accrued over the years. They do not know how to tackle their debts and cannot envision a situation where they pay those debts off. There are several different tools and tricks that a person can use to manage their debts over time. These tricks work best if a person has several different debts of different sizes and interest rates.
One approach is called debt laddering. Laddering is when a person organizes all of their debts from the largest interest rate to the smallest. They start paying minimum payments on the lower interest rates and put all of their funds towards the debt with the highest interest rate.
Once that is paid off, Coral Funding suggests that a person move on to the next debt in line until they have paid off all of their debts. This approach helps a person reduce their payments and pay off their debts one at a time. Completing a debt payoff gives a person a psychological benefit while also freeing up some of their money for the next debt on the list.
Find extra income
Another way to rebuild finances is to try and find as many sources of extra income as possible. These new income sources will help a person pay bills and build up savings. These savings can be put to large purchases or preventing further credit card bills down the line. The extra income can be gained through monumental or minor efforts. A person could go back to school and find another job.
This path could bring some individuals hundreds of thousands of dollars down the line. There is also the possibility of working a second job or one of a handful of alternative jobs. Coral Funding suggests pursuing jobs with companies such as Uber and Doordash.
All of these efforts can pad the monthly income of an individual and help rebuild their finances. Extra income can help make a transition to financial solvency much easier and more feasible. It also does not have to be a permanent status that a person locks themselves into.
Strategically use debt
It is usually advised that individuals try to avoid debt as much as possible when they are in a financially precarious situation. They are advised to cut up their credit cards and avoid many of the stores where they like to shop. These individuals should also consider ways in which more debt could actually help them.
Some people have debts that were issued to them in adverse circumstances. They may have a payday loan which ballooned in size when they forgot to make one or two payments. Credit card interest rates can quickly skyrocket as well.
The main step that individuals should take with these debts is to find a company that will offer a blanket loan that is the same size as all of their current debts with a low interest rate and favorable terms. They can take out the loan and use it to pay off all of their other debts.
Then, they can make regular payments on that debt. The savings from fees and interest could be as much as the principal of the loan itself. Individuals must make sure that they have fixed their prior bad spending habits before taking out such a loan. If not, it could simply serve as another way for an individual to get into more financial trouble.
Anyone who is currently in a severe amount of debt needs help. They need to work with trained professionals who can aid in the process of paying off their debts and getting their financial house in order.
These individuals also need to consult alternative means of financing and funding. They may have to swear off credit cards for years while relying on alternative forms of credit. These companies can help provide the funds on generous terms that an individual needs to finally solve their financial problems.