If you’re not bringing in very much every month, then you might despair at your prospects for paying down your debts. The longer your debt lingers, however, the more you’ll end up paying in interest. Therefore, it’s worth thinking about early repayment. But exactly how realistic is the prospect of paying down debts when you’re on a low salary? Let’s take a look at a few essential strategies.
Create a budget
Your first step should be to work out all of your outgoings. Establish where the major areas of spending are, and what you can do to bring them down. While regular bills like council tax, rent and utility payments might draw the eye, it’s worth paying particular attention to items of spending that might be going under the radar.
If you’re paying £20 a week for takeaways, for example, you might save money by learning to cook meals, instead. Gym memberships, television subscriptions, and taxi services might all put a dent in your bank balance, too.
Manage current debt
If your debts are out of control, then you might seek to consolidate them into a single monthly payment. This is done through debt consolidation loans. This is a single loan that you take out to pay off everything else. You might even find them available for people with poor credit ratings.
Check the APR on the loan you’re considering. If it’s lower than what you’re paying on your existing debt, then it’s time to make the switch. A debt consolidation loan isn’t practical for everyone, but it can make your financial affairs much simpler.
If you don’t want to consolidate, then make sure that you’re paying down the debt with the highest rate of interest. This will ensure that you’re paying less money in the long term. An alternative approach is to deal with the smallest debts first, which can give you a sense that you’re making progress, even if the repayments aren’t as optimal.
Consider additional sources of income
There’s one thing we haven’t yet considered, and that’s the possibility that you might bring in additional income through extra work and other measures. You might, for example, start a side hustle. This might take the form of delivery work, tutoring, dog-sitting, and other forms of temporary work in the gig economy. This approach has the advantage of diversifying your income stream: you’ll be less reliant on the money you’re earning through your main occupation.
You might also think about selling some of the old items you no longer need. If you have a house filled with clutter, then it might be time for a clearout. You might improve not only your personal space and mental wellbeing but also your bank balance.