How to Save Money While Paying Debts

You are short of cash to survive the whole month, but you can no longer borrow some money because of a very bad credit rating and history. How can you get extra cash, much more save some for stash?

Saving money is never too late even if you already have a mountain of debts to pay. With debts, the more you need to save and avoid deeper quagmire of financial trouble. With all your dues in addition to you and your family's daily needs, doing it seems so hard to do, if not impossible at all. You will never run out of options on spending your cash. Surprisingly, this is also true in settling debts.

People with bad credit rating can still do something to improve their situation. Here are four possible ways to save money while you pay debts from exact income.

1. Try debt consolidation

This is the term for a larger debt to one company meant to pay off the rest of your smaller but numerous dues with other lenders. Most banks and other lending institutions offer this kind of service. With this, you no longer need to deposit or personally hand over separate payments to different lenders. It will save you energy, money, and time, as well as save you from the hassle of going to many locations on time just to pay them.

Debt consolidation is an easy way to eliminate multiple interest rates
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The process is simple. You will borrow a bigger amount of money on the condition that you will pay off the rest of your debts, so that all your payments will just go to the debt consolidation loan lender. You no longer need to pay the extra charges and interests from so many debts. You can even talk to you lender to give you some considerations in terms and set-up.

Some banks also offer services to do the paying for you. For minimal or no cost, they will save you the effort of talking to your current lenders one by one. In the end, you save some money—money that you could have used in paying multiple debts.

2. Deposit extra cash for future payouts

Try to ask your lender to give you the smallest monthly due possible. It doesn’t matter if it prolongs your debt a little longer for as long as it becomes easier to manage. The important thing is that you get enough time to save and earn for it.

This way, you can earn from interest from whatever little savings you have, or invest it in another lucrative venture, such as mutual funds or the stock market. Do not pay using your extra money just to finish your debt a little faster. Most banks fine you for that because they also want to have guaranteed cash flow in the months to come, which is exactly what you should do as well. Opening a bank account dedicated for paying debts is the surest way to avoid spending whatever savings you have. Talk to your bank to learn more on this setup (it’s basically the same with time deposits where some restrictions are given to withdrawals).

What if the interest of your debt becomes larger than the interest of your savings when you extend the terms of payment? You can always talk your lender to arrange for the lowest interest rate with the lowest monthly amortization. Most banks are lenient enough to retain the old interest despite extension in exchange for guaranteed payments. After all, they would you to pay them no matter how long instead of them not getting any payment at all. Like what’s aforementioned, guaranteed cash flow is also important for them.

If that is not possible in anyway, might as well do the calculations yourself and determine for yourself if it is more advantageous to have bigger amortization with smaller interest rate but longer terms, than smaller amortization with bigger interest rate but with shorter terms. Some debtors are amenable to pay slightly higher interest rate just to have bigger breathing space in the months to come. Weigh if that is also the case with you.

3. Avail of promos

Banks and other lending institutions, credit card companies included, have different kind of promos from time to time. Sometimes, they provide discount for those who can pay a month in advance, while there are also instances when people with delayed amortizations can avail of waived penalties. There was one time when this big bank offered free items for debtors who won’t miss a single amortization within one year. The perk is not much, but you won’t find a free oven on the streets either.

The type of promo varies from company to company. They have seasonal promos depending on their marketing strategies (oftentimes in order to convince debtors to pay on time).

4. Take advantage of rewards system

Rewards system allows debtors to earn points for every on-time payments, advance payments, exact payments, and periodic payments (e.g. quarterly, bi-annually, and annually). These points can be exchanged for cash or usually, products. Lenders will do everything to convince their clients to fulfill their obligations. That can be your ticket to earn extra cash while paying debts.

There are times when gifts are given instead of cash, which is not a bad thing considering the fact that you owe them to begin with. It is also possible that you get extra points for referring another borrower, especially if it is business client that will avail of a business loan.

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