indebtedness

Energy crisis and explosion of energy bills: how to get out of over-indebtedness?

Even if the over-indebtedness rate is down during 2022, the number of people in financial distress is still worrying and will increase considerably with the explosion in energy prices! Loans are piling up, subscriptions are multiplying, bills are getting longer and plunging many people into a financial abyss. Are you out of breath and dreaming of a better life? Here are some practical tips to permanently free yourself from over-indebtedness.

Evaluate your expenses and find out where you can save money

For good management of your money, it is important that you know where it is going. In other words, you need to know your expenses down to the smallest detail. Thus, taking into account the resources you have to cover your expenses, you will be able to anticipate more, wisely manage your contingencies and save money.

In addition, it is important to categorize each expense. To do this, you must calculate the percentage of your income that you can allocate to each expense category. Now is the time to sort out your loads. Analyze them and check if the expenses are reasonable in relation to your income. This lets you know exactly what you're saving each month, and how much to improve it.

over-indebtedness repurchase of loans

The repurchase of loans to reduce your monthly payments

Among the many methods used to permanently get out of over-indebtedness, the buyback of loans is undoubtedly one of the most effective. Also called credit consolidation, this approach allows individuals who have taken out several loans (personal or other) to reduce their monthly payments. The first advantage of this method is the consolidation of all your credits into one. Instead of accumulating debts to pay, you will only have one.

Whatever the size of the debts contracted, the repurchase of loans will make you benefit from a more advantageous debt ratio. Banks generally grant on the basis of several factors (type of credit, age, professional income, confidence in the customer's ability to repay, etc.). Depending on the current loan conditions, the new interest rate may be reduced compared to those of the old loans. On mortgage loans, for example, interest rate reduction can save you up to several thousand euros. This is what will allow you to have lower monthly payments and a more serene life.

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In the event of very high monthly charges, you can benefit from the repurchase of loans by following a traditional process. First, you have to compare the credit buyback offers available to choose the best one. At this level, insist more on the repayment period, the interest rate and the monthly payments. Then, compile your loan redemption request file. In practice, it is recommended to seek the expertise of a banking intermediary to increase the chances of your application being accepted.

Set a budget and stick to it as closely as possible

In practice, you don't need to be a professional to set a good budget. You can get away with it by following a few handy tips.

Start by calculating your income

Budgeting always starts with calculating income. If you have several sources of income, take your payslips and add up your monthly income. This does not apply to the self-employed. If you find yourself in this category, look at the income of your last 2 quarters to make an estimate.

List your fixed and variable expenses

At this stage, make two lists for your expenses, one for the fixed charges and the second for the variable ones. Fixed expenses are those that you incur on a daily basis. They take into account not only expenses relating to housing, but also those related to the car (insurance, fuel, parking, etc.). You must also include on this list your monthly savings reserved as an emergency kitty.

As for variable expenses, these are expenses that are not essential to your daily life. These are expenses related to shopping, outings and leisure, gym memberships... which can change from one month to another. Be sure to define a categorization for each expense made. By doing so, you avoid the risk of confusion.

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Calculate total disposable income

After the list of expenses, add them up to get an idea of ​​the total amount of your expenses. It is the difference of the total amount of income with the sum of expenses that gives you the total disposable income. In practical terms, it's the money you have left after all the expenses have been made. It is this amount that will be saved and will help you achieve long-term goals.

Stick to the budget you set

To put an end to over-indebtedness, it is not enough to define your budget. First, identify the reasons why you need to stick to your budget. Indeed, by specifying these different issues, you will have an easier time complying with the objectives you have set for yourself. Above all, they must be realistic and achievable.

To meet your budget, you must also be prepared to deal with unnecessary expenses. You need to be disciplined to avoid expenses other than those budgeted. Finally, credits in all their forms should be avoided. In practice, cash and immediate payments are better than revolving credits.

Consider debt consolidation or a personal loan

Debt consolidation is an excellent means of relief for people in financial distress with large debts. It consists of repay debts accumulated on lines of credit, overdrafts, and high-interest loans like payday loans. This means allows people who are very late in repaying their loans to take out a new loan to settle their arrears.

This last loan is generally more advantageous than all the previous ones. Your monthly payments are reduced to a single payment. So also consider this possibility to lighten your monthly payments. However, to benefit from debt consolidation, you must build a fairly solid case.

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Moreover, in the absence of debt consolidation, you can opt for a personal loan. Unlike debt consolidation, the release of funds is easy and no proof is required. In addition, it is usable for all expenses.

get out of over-indebtedness

Make a plan to pay off your debts as quickly as possible

In theory, you can quickly pay off your debts and simplify your life if you adopt a good repayment plan. To be effective, the repayment plan must be based on 3 things. Start by taking stock of your debts. Take into account all the debts, and especially the interest rates of each of them.

Ensuite, the faut prioritize debts to be settled. To this end, it is recommended to prioritize those that will cause strong bank penalties. Keep an eye on your debt ratio. To know its value, simply divide all the expenses by your income, and multiply the result obtained by 100. Finally, you have to save and reduce the usual expenses, while favoring those that are more useful.

Renegotiate interest rates on your loans to reduce monthly payments

With a view to getting out of your over-indebtedness situation, you also have the possibility of renegotiating the interest rate of one or more loans that you have contracted. Interest rate renegotiations are made directly with the banks that granted the loans, which may or may not accept them.

They can give rise to obtaining better borrowing conditions, with lower rates than originally. In practice, you can above all benefit from reduced monthly payments.

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