Clearing debt isn’t easy, depending on the amount involved. If you’re about to start a business venture of some sort and need to quickly pay down debt before applying for a business loan etc It can be difficult. Clearing debt fast requires a particular mindset. You’ll have to make certain sacrifices and focus on your end goals. With that said, it’s certainly doable…here are some tips to get you started.
Educate Yourself About Debt Clearance
You can’t approach debt clearance properly if you haven’t educated yourself about it to a sufficient degree. There are different ways to clear a debt, and if you just start from the first bit of advice you read you might not be approaching it the best way for you. There are a lot of different ways you can educate yourself. Reading books help, if you’re not a reader consider looking for some of the best story podcasts which are centered on finance and debt. You can also watch videos on YouTube or speak to your local bank. Remember, always vet where you’re getting the advice from. You want something open-ended and helpful, but also something which addresses your particular situation.
Be Open About Your Situation
This includes being honest with co-founders, investors, incubators, etc. You have to be confident people know where you’re coming from and what baggage you have. It’s important because if you apply for business loans jointly, or any other credit it might throw up alarms when your debt is revealed, but it will count as declined credit and this isn’t good for a new business. Be open and honest with your partner and maybe you can work something out or find a new angle to target credit.
You might find talking hard, but don’t let it put you off. Debt is part of the business journey at any rate. It’s better off being honest at the outset than holding it in and worrying about it over the long term. Be open about it, inform them what you’re able to do about it, and go from there.
Consider A Consolidation Loan
Consolidating is important. It also looks better to lenders down the road. Having a chunk of debt from one place is better than having lots of debt from multiple lenders. Consider consolidating your debt. You’ll need a loan from a bank or mutual which will completely pay off all of your lenders. You’ll then pay the bank back over time depending on your agreement.
You need to work out the interest rates and come to a conclusion on whether it’s better for you or not. Usually, it will be, but if the original debt was secured at really low-interest rates it might be better for you to apply the snowball method of debt clearance instead. You simply isolate the debt with the highest interest and pay that off first (while making only the minimum payments to other debts). This way, you end up paying less because you isolate the high interest and get rid of it quickly before moving down the chain.