How do you escape poverty if debt exceeds income?

Are you struggling with debt and need practical solutions?

You might be tired of reading tips like- spending low money or not dining out for a while. Yes, these are important, but tackling debt is more important than this. It involves analysing your finances and liabilities and planning debt repayment. 

However, individuals facing a sharp cash crunch as unemployed may struggle. It is because things get frustrating when the debts spiral and you can’t do anything. It is where an individual thinks- “Is it possible to settle debts despite low income?”

Yes, despite unemployment or low income, there are grim possibilities of paying some of your debts. The blog lists some ways to counter debts and escape poverty.

6 Ways to settle Debt with low income

One of the best ways to clear debt is by increasing your monthly repayments.  Check whether you can do so without any penalty. If yes, you should try to pay extra on high-interest debts especially. It will help you reduce debt drastically and improve your financial status. Here are other ways to handle debts as an unemployed:

1) Cut expenses to save for debt payments

Dedicate a separate savings account for debt repayments. It will help you save money for a specific goal. Usually, individuals cut spending to counter multiple liabilities like- car repair, household repair or medication. However, it does not meet your exact goal for debt repayments. Thus, saving for a specific purpose helps you reach your goals closer.

Keep an account for the costly debts and plan out payments. Check and tick off those debts you paid in full or part payments. Calculate the pending amount. It will help you know whether or not you must save a higher amount.

Meanwhile, you cannot ignore critical expenses. If you must meet an emergency but don’t want to skip the debt payment, check other ways.

For example- get affordable loans for the unemployed from a direct lender immediately. It may help close critical sustenance requirements. Yes, you may get it by revealing minimal income. Tap it only if you can’t delay the need. Moreover, you can re-schedule payments if finances change.

2) Check relief schemes for household needs

Unemployment is all about saving money in whatever way you can. Thus, check government schemes that help individuals get relief on rent, utilities, energy costs, etc.  It may help you reduce spending towards critical liabilities. If not all, you can at least get the opportunity to pay less towards rent or energy expenses. You can utilise the amount you save to clear debts.

3) File for Debt Relief Order

Debt Relief Orders help you settle debt without you paying anything. However, you can do so only if:

• You owe less than £30000
• Your monthly income is less than £75/month
• Do not own assets and vehicles of more than £2000
• Must be living in England for 3 years
• Not applied for DRO in 6 years
• You are not a homeowner

If you qualify, you can:

• Stop making debt payments
• Do not need to pay debts at all after 12 months

However, you still must pay utility and student loans. Analyse the debts; you can cancel them off with a Debt Relief Order. Check whether you may benefit from this.

4) Negotiate a better rate with creditors

Even if you do not think this may work, try it.  It may help you reduce your liabilities with revised interest rates and terms. Here is how you can begin with:

a) Review existing rates

Analyse the interest rates on your existing debts. For example, check payday debts, student loans, credit cards, short-term debts, etc. Consider penalty costs also.

b) Research the market rates

Understand the market rates similar to other loan products. It will provide you with a foundation to negotiate better.

c) Prepare your delivery

Highlight your payment history, creditworthiness and loyalty towards making part payments. Analyse the total amount you can pay towards each debt. It will help you tell the exact with clarity to the creditor.

The goal is to convince the creditors of your affordability and sincerity towards debt clearance. If they believe you, you may get better interest rates and terms.

5) Check the possibility of consolidating debt

Debt consolidation may help reduce debts, get affordable payments and boost credit scores. However, you still need to make payments. Instead of dealing with multiple lenders for your debts, you pay to a single lender. It eventually rids one of constantly keeping a check on lenders for repayments. Additionally, it helps you concentrate on other aspects like- how to remain debt-free after clearance.  

You can either consolidate debt with a debt consolidation loan. However, it may prove costly for unemployed individuals.

But, you can settle some debts with very bad credit loans from direct lenders in the UK marketplace. It is specifically for low-income and credit-score owners. You can consolidate or merge some debts using this personal loan. Choosing a loan specifically for bad credit may help you qualify quickly and fetch better rates. Once you do so, you can get rid of most of your debts hassle-free.

6) Analyse ways to earn extra

If you still struggle to save enough toward debt payments or negotiate, earn extra. Check the best ways to boost your income. You can either increase your part-time jobs or seek full-time employment. Analyse the total debt amount to repay alongside the household expenses. It will help you understand the salary criteria for which to aim.

However, finding a job quickly is challenging if you have been unemployed for a long. But you must invest your best efforts to fetch one. You can do so by checking and updating your resume. Add skills you nurtured over time or the internships you applied for. It lends authenticity and makes your resume comprehensive. The employers may consider you for the position.

Bottom line

These are some ways to settle debts and escape poverty as an unemployed. Check the total debt amount and set up a separate account. Save some amount specifically for debt clearance.

Additionally, reduce the expenses, on the other hand, by seeking government relief. You can also do so by improving your income prospects and having multiple gigs. Managing the debts from the highest to the lowest interest rates helps you get debt-free quickly.