How To Pay Off Debt on a Low Salary
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How To Pay Off Debt on a Low Salary
For many people, especially those with low salaries, debt can be a significant source of stress and anxiety.
Even though it can seem impossible, there are steps you can take to get out of debt.
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You can take control of your finances and work towards a future without debt by analyzing your total debt and income, making necessary spending cuts, prioritizing your debts, and utilizing government assistance programs.
You may need to consider looking into side hustle opportunities and remaining dedicated to your repayment plan.
In this article, I will go through the options you have to reduce debt in more detail and offer pointers and recommendations for paying off debt on a small income.
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Key Highlights
🎯 The first step towards paying off a debt as a low-income earner is to list out all your expenses.The more you can cut, the more money you have to pay your debts.
🎯 List your debts from highest to lowest by their interest rates, and start paying from those with the highest interest.
🎯 Suppose you need help negotiating with your creditor. In that case, you can always use the support of a Credit Counselling Agency.
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Paying Debts With Low Income
To pay a loan while on a low income, you must thoroughly assess your total debt and match it with your current income. Though it seems ineffective, it is a great way to understand what you have to put toward your debt every month.
Below are the steps you need to take to pay off your debts as a low-income earner:
1. Match Your Debts To Your Income
The first step towards paying off a debt as a low-income earner is to list out all your debts. It will allow you to understand everything you have to pay and all the interest rates and minimum installment payments permitted.
Whether your debts range from credit card debts to personal loans, outlining them will allow you to pay them off in a well-structured manner.
Once you have correctly outlined your debts, you have to calculate your monthly earnings and figure out how much you need to set aside for your debts.
Your calculation should include your regular 9-5 salary and payments from your side hustle and other extra work.
2. Reduce Your Monthly Expenses
To pay a pressing debt as a low-income earner, you must reduce your monthly spending. The more you can cut, the more money you have to pay your debts. You must create and stick to a budget to effectively reduce your monthly expenses.
First, you can write down all your monthly expenses to see the areas you can afford to cut off. Once you list all your ‘needs’ and ‘wants,’ you can always make most of the cuts from your ‘wants’ column.
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Things to cut out from your expenses can be additional expenses from eating out, shopping, or payment for unimportant subscription services.
That Netflix or Amazon Prime subscription can always wait till your debt repayment is complete.
3. Set Repayment Schedule Based On Interest
Debt repayment interests vary according to the kind of debt and provider. You must adequately draft all your debts and outline their interest rates when on a low salary.
You have to pay up loans with higher interest rates first, as they can quickly accumulate to considerable sums in shorter intervals.
List your debts from highest to lowest by their interest rates, and start paying from those with the highest interest.
4. Negotiate With Creditors for Better Repayment Plans
If you find it difficult to repay a specific debt, always be bold enough to contact your creditors for possible negotiations. You can do this by contacting creditors to explain your situation.
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Let them know you are on a low salary and finding it extremely difficult to pay up, and plead for a restructured repayment plan that will match your salary.
Suppose you need help negotiating with your creditor. In that case, you can always use the support of a Credit Counselling Agency. These agencies can help you with loan repayment plans and negotiate the best deals with creditors.
To make sure you are on the right path, avoid random agencies, as you may end up paying massive fees that can, in turn, affect your loan repayment even more.
5. Research Refinancing Options
In a situation where you are totally out of ideas regarding your debt repayment, you can do research for possible refinancing options. You can visit your bank to see if they offer loans or refinancing deals.
Another alternative refinancing option can be to join a peer-to-peer lending platform like Prosper or take a refinancing loan from a provider with reasonable terms.
Consider the free attached interest rates and other rules when looking for a refinancing loan. If you have access to government grants, you can apply and use them to handle your expenses.
There are many government grants often available for debt relief and other purposes. You can always check out the National Foundation for Credit Counselling for debt counseling services.
6. Explore Side Hustles
If you are a low-income earner trying to pay an urgent loan, one of the most effective steps is to increase your income streams. Regardless of your skillset, there is always a matching side hustle that you can conveniently run on the side without much stress.
Here at HustleCabal, we do a lot of detailed research on the best side hustles online and offline. Thus, you can always refer to our lists for the best side hustles for 9-5 workers.
After researching your preferred side hustle, you must create a new schedule, generate awareness of your side hustle, and stay committed to your craft.
As in all works of life, consistency is vital, so running a side hustle can be highly profitable in the long run.
Final Thoughts
Paying up a debt with a low salary is a challenging task. However, with the proper dedication and focus, you can become completely debt-free again.
You always have to remain committed to your loan repayment and constantly challenge yourself to explore more areas of income.
Cutting expenses helps immensely, as it can shorten your loan repayment time depending on how many expenses you cut.
In all, we do wish you luck as you strive to become debt-free again!
FAQs
Below are some frequently asked questions about paying up debt as a low-salary earner:
Is it possible to pay off debt with a low salary?
Yes. You can pay off debts with a low salary. All you need to do is cut your monthly expenses, create a repayment outline, and consider doing extra jobs.
The whole process can, of course, take some time and effort while paying a low salary. However, you can always succeed with the right commitment.
How long will it take to become debt-free on a low salary?
The time it takes you to become debt-free on a low salary depends on many factors. If you are committed to your plan, prioritize your loans based on interest, and run some side hustles, you can always pay up within a few months.
