How to help your loved one get out of debt?

Getting out of debt is quite challenging. It can be demotivating and result in adverse consequences. It is obvious to feel inclined to help a loved one in debt as a gesture of care and affection. Normally, you would bail them out financially by offering some money or helping them to come up with repayment strategies to ease off the burden of the debt. The struggle with debt could feel like a marathon as it depends on the total amount you borrow. The higher the debt, the more time it will take to get out of it.

Finding someone in your family in debt could be disturbing for the rest of the members, too. As you are all financially connected to each other, stress as a result of insurmountable debt would wreak havoc on your mental health, too. Well, you will have to take the bull by the horns if you want to end this once and for all.

First off, you need to bear in mind that your loved one in debt would need both emotional and financial support. This is the crucial time when you have to cut some slack as well as ensure they do not make mistakes they made previously.

Ways to help your loved ones get out of debt

Here are the ways you should follow to help your family member in debt:

• Two things that you must not do

You might be tempted to support them financially. It is quite normal to assist them by offering money so they can discharge the debt sooner rather than later, but this is a wrong move. Bailing them out financially will never make them realise where they went wrong. They will keep incurring debt and become dependent on you to settle their obligations. Instead of offering them money, you should propose some strategies to help them pay down their debts.

Another thing you should avoid is to judge them. You may not be able to open up when you are being judgmental due to the debt they owe. An honest conversation is intrinsic to helping your loved ones in debt. Being judgemental could result in arguments. Instead of solving a problem, you will end up with unnecessary conflicts.

• Listen to them

 Debt is undoubtedly overwhelming. Your loved ones could be embarrassed about their debt condition. It is likely that they are hesitant to be frank about their financial condition. They may think that you might be judgemental about them. Chances are you do not understand their true condition and may become angry after learning about their ways of managing their finances.

You should listen to them. Make sure that you understand their financial condition properly so you can devise a repayment plan. Encourage them to be frank about their debts. Your loved ones should not be afraid of anything. They should honestly tell you about their debts so you can help them get out of debt smoothly.

Be empathetic with them. Your loved ones could break down, but your emotional support could help them ride out.

• Share useful resources

While you may always want to support, sometimes it may not be sufficient. If they do not owe too much debt, they may be able to set up a repayment plan that suits their budget. Normally, there are three ways to tackle hefty debt: a debt consolidation, a debt avalanche, and a debt snowball method.

Each method has their own pros and cons and they are subject to certain terms and conditions. Whether you use a debt avalanche or a debt snowball method, your debt will not disappear overnight. If you use a consolidation loan, you may consolidate small loans such as no refusal payday loans, bad credit loans, and personal loans, but they do not include credit cards, auto loans, and mortgages.

If the debt is way too much, you may have to get help from debt management companies or take advice from StepChange and Citizen Advice, for example. Such resources could potentially help you implement some tricks to repay your debt faster.

• Help them with budgeting

Budgeting is vital when it comes to getting out of debt. It enables you to gain insight into where your money is going and how much. A golden rule of thumb says that you should help your loved one with creating a budget. There are various methods of budgeting. Make sure your loved one uses the one that suits their financial circumstances.

Budgeting will come in handy if they adhere to it unless the whole debt is settled. In fact, you should encourage them to budget afterward as well. Budgeting will preclude them from falling into debt. If they do not like to maintain a manual spreadsheet, encourage them to use a budgeting app.

They can use any app that solves their purpose. It is required to be linked to a bank account so it fetches all transactions and records them in one place. Always remember that cash and credit card transactions must be recorded manually. When they know how much money they have spent, they will try to be frugal with the rest of the money. In this way, they can avoid relying on loans.

• Propose them easy solutions

There is no doubt that your loved ones will have to whittle down their expenses. Even if incomings are greater than outgoings, cutting back on expenses is often recommended to discharge the debt faster. However, do not let them deprive you of essential needs. You should rather suggest diminishing discretionary expenses such as dining out. Help them with saving money by buying non-perishable goods in bulk. Buying from wholesale markets also helps save a lot of money.

To sum up

Loans should be used only when there is an emergency. Otherwise, they can trap you in an ongoing cycle of debt. If your loved one falls into debt, propose some strategies to them so they can pay it off. Further, you should help them with living a debt-free lifestyle. Be considerate while helping them get out of debt.

• Country List: United Kingdom