, regardless of how much money you have. On the other hand, if you're earning a relatively low income, that challenge can seem more like a debt trap that lasts forever. And, that's especially true when you consider the fact that for a couple of years.
So, what do you do if you're living on a low income and? Are you destined to wade through the waters of debt forever or is there a lifesaver that can help you find your way out?
Don't worry. You don't have to drown in debt forever. There are things you can do to pay your debts off faster than you would by simply making minimum payments — even on a low income.
How to get out of debt on a low income
"If you're in debt and have a low income, it's important you have a plan to get out of it," says Steve Azoury, ChFC® and owner of Azoury Financial. Here are a few things to consider as you develop your plan:
Sign up for a debt relief program
"Your plan should include debt consolidation options," says Azoury. Those options usually include:
- Debt consolidation loan: You may qualify for a that comes with a lower interest rate than you're currently paying. These loans also typically offer fixed payment plans and a clear path to debt payoff.
- Debt consolidation programs: Debt relief experts use the details of your financial hardship to negotiate lower interest rates with your lenders. They also put together a payment plan that's designed to get you out of debt as fast as possible. You make your payments to the company and the company pays your lenders individually on your behalf.
If debt consolidation doesn't provide enough relief, consider debt settlement. As part of these programs, debt relief experts negotiate the principal balance of your debt with your lenders. You make your payments to the debt settlement company, which pays your creditors once a settlement is reached.
Because lenders typically go months or years without a payment, this can have a detrimental impact on your credit. Nonetheless, debt settlement could be a wise idea if you're struggling to make ends meet.
Cut expenses to free up extra cash
One of the best ways to pay debt off quickly is to make more than minimum payments. That can be a challenge on a low income. However, you may be able toto help you pay your debts off faster. Here are some common ways to do so:
- Make your morning coffee at home.
- Cut the cable cord and opt for streaming services.
- Bring your lunch to work instead of eating out.
- Carpool to save on your commute.
- Cancel unused subscriptions.
These are just a few ways to save. Chances are you'll be able to find plenty more ways to put money back into your budget with a little brainstorming.
Take advantage of opportunities to earn more money
A low income can be challenging — especially if you're trying to pay off debt. Why not take a few steps to? For example:
- Freelance: Are you a strong writer? Do you love photography? There are likely plenty of brands willing to pay you for your talent. Look for ways to get paid doing something you love and you might be surprised at the side gig opportunities you find.
- Go back to school: You could further your education to work your way into a higher-paying career.
- Talk to your manager: Have you asked for a raise recently? If you've been working for the same employer for a while, asking for a raise could result in an immediate increase in your income.
- Start a business: Chances are that you have a business idea or two you just haven't pulled the trigger on. Start your business now to boost your income.
Use financial windfalls to your advantage
Just about everyone has a financial windfall from time to time. More than seven out of 10 people receive a refund when they file their annual taxes — and those refunds are typically thousands of dollars each. What should you do with these financial windfalls? "You should also be allocating a percentage of bonuses, tax refunds or cash gifts toward your debt," explains Azoury.
The bottom line
The only thing exciting about debt is finally being able to pay it off. Although it may seem impossible to escape your debt if you earn a low income, there are things you can do to speed up the payoff process. Use the tips above to help you get out of debt faster.
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