Debt Consolidation Loan and Other Measures that You can Take to Reduce Debts
Tuesday, April 24, 2018, 6:00 AM | Leave Comment
Businesses of all sizes at any stage of its life cycle require a steady supply of finances.
Whether it is for business start-up or sustaining ongoing business activities, you need finances for different business needs.
Loans and credit lines are the most popular means of business financing, and therefore it is natural for business owners to get used to debts.
As inflation is on the rise and the cost of inputs for running businesses keep on increasing there is a need for more finances to run businesses. This obviously exposes business owners to more debts, as they have to approach various lenders for money.
The weight of growing debt becomes difficult to bear, and business owners look for measures in debt relief to make debts more manageable.
While debts become a necessity for businesses, it is not so for individuals. However, there are situations in life that one comes across when the unexpected requirement of funds become a priority. In such situations like medical emergencies or educational needs, taking loans or using credit cards is the only way to tide over the crisis.
The problem arises when you start relying on debts to satisfy the basic needs of life, which you should be capable of managing with the money that you earn.
Once your lifestyle gets dependent on credit cards, you do not feel any remorse for borrowing but rather turn reckless with finances as debts keep on multiplying. The entire American nation is now facing this scary situation. The ballooning bills that the majority of the population has to handle could spell trouble with debts.
Carrying too much credit card debts means you expose yourself badly to the threats of bad times since you do not save anything. Moreover, dealing with spiraling debts and several lenders become a nightmare for individuals as well as for businesses. Knowing how to keep debts manageable would save you from the ignominy of filing for bankruptcy.
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Take cost-cutting measures to free up cash
Whether it is for business or individuals, whatever we spend are not always justified. On studying the spending patterns, you would discover that often our habits and not needs drive spending. When you spend out of habit, it means that you have lesser financial discipline because most of the spending is emotion driven with less reliance on logical thinking.
There is always some room to reduce spending by analyzing every expenditure, and this can be the first step in reducing the need for money that automatically put brakes on borrowing. When you cut down on spending and have some extra cash available, you can put it to good use.
Business owners have to identify the area of business that got the company into debt and attack it head-on. Businesses need to avoid superfluous spending habits to keep their finances in check.
If delayed debtor’s payment stretches the cycle of cash circulation, ramping up the efforts in the collection can boost cash flow.
The more you can keep cash on hand less would be the need to borrow, opine the debt management experts at nationaldebtrelief.com.
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Review the budget
If any company exposes itself to several debts and keeps adding new debts, it is a clear sign that there is something wrong with the budget. The numbers used for budgeting were grossly wrong, as also were the considerations about the current financial position.
The basic tenet of budgeting is to generate enough revenue that covers the expenditure based on the present financial condition.
There must be money available for meeting the fixed expenses like utility bills, payroll, rent, etc. A portion of the budget should also allocate money for meeting manufacturing costs like material cost and logistics, which are components of variable cost. Whatever remains after meeting the expenses goes for paying debts.
If you are paying more than the minimum amount for credit card debts would ensure that you do not become a victim of revolving credit that can cause unending woes, as you would almost find it impossible to come out of debts.
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Knock off the highest interest carrying debts first
Review the debts with focus on the interest rates to identify the ones that carry the highest rate of interest so that it becomes your priority to pay it off first. These are loans that make you bleed the most, hence need top attention for repayment.
Paying off credit card debts should rank high in the order and use all resources to knock it off at the soonest.
If any of your business loans have a connection to your assets as collateral security, then this type of loans should also figure high on the list of quick repayment. After all, no one would like to risk losing personal assets by defaulting on loans.
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Re-negotiate with creditors
Reach out to the creditors and make your intention of paying back very clear to them despite the financial hardships that you are going through.
Ask for a better repayment plan that constitutes the hardship plan that many creditors accept. Alternatively, you can request them to accept a settlement amount that is somewhat less than what you owe.
Highlight your good intentions of paying back by telling them that you are ready to pay provided they reduce the amount as you could pay them back faster.
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Consolidate Debts
Another way of reducing monthly costs without affecting your credit score is to consolidate debts to convert it into a single large loan.
Work out the total amount outstanding and take a fresh loan of that amount so that you pay back all creditors and carry on with the new loan.
The ideal choice is to target all short-term loans and replace it with a single long-term loan.
By availing better interest for the new loan, you can generate some savings as well as lower the monthly payments.
To deal with creditors, avail the services of a debt management company because they are not only experts in bringing creditors to terms but can also arrange for the new debt consolidation loan.
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