Tips for managing loan debt

You can manage loan debt by sticking to a budget, making timely payments, consolidating debt, and cutting back on unnecessary expenses. By managing your existing debt the smart way, you can set yourself up for success for higher loan amounts, lower interest rates, or other financial perks when you apply for loans in the future! 

Almost everyone is struggling with some form of debt. In 2022, global public debt reached an all-time high of $92 trillion.1 Whether you are looking to manage payday loans, installment loans, bad credit loans, or other types of debt, there are tips you can take advantage of to help you handle your finances responsibly. 

How to Responsibly Manage Loan Debt

Having debt isn’t inherently bad, but when managed irresponsibly, it can become a massive burden in your life. Below are some tips to help you manage outstanding debt efficiently and responsibly. 

Create a Budget and Stick To It 

The first step in organizing your finances is to create a realistic budget you can stick to. There are different methods for budgeting with irregular income or a steady paycheck. 

Create a list of all your living expenses like: 

  • Rent or mortgage payments
  • Existing bills or loans
  • Groceries
  • Insurance
  • Travel costs, like bus fare, and other transportation fees

After you have your recurring expenses list, compare that amount with your monthly income. If your budget exceeds your monthly income, then you may have to make some adjustments. Or, if you have found you will have leftover income after the expenses on your budget are taken care of, you can use those funds for financial goals like saving for a purchase or paying off debts faster. 

Know How Much You Owe

When trying to keep your finances organized and pay off debt, it’s important to have a cumulative view of everything you owe. By knowing exactly what you owe, you can work your debt payments in with your existing budget. 

When calculating your debt, make sure you include all your loans, such as: 

  • A student loan
  • A mortgage loan
  • A car loan
  • Medical debt/medical bills

Having a comprehensive view of your current debt will also act as an indicator of how much room you should have in your budget for additional expenses. For example, if you find you have a significant amount of debt (thousands of dollars or more), you may not have very much room in your budget to take on additional expenses like more loans, emergency expenses, etc. At that point, you would know that taking out more loans or accumulating other debts would be a major hindrance to your being able to manage your current loan debt. 

Make Timely Monthly Payments

Another key component of managing your debt responsibly is to make consistent monthly payments on everything. Having a healthy payment history will help you keep your credit score intact while you pay off debt and will also show future creditors that you can be trusted with paying off your financial obligations. 

Develop a Debt Management Plan

After you’ve calculated your total debt and know how it will work with your budget, create a timeline as to how long it will take you to pay off your debts. Knowing how long it will take to pay off your existing balances can help you set financial goals or plan for future expenses. 

For example, say you are looking to purchase a new car with a car loan but are almost done with paying off a large chunk of debt. In this circumstance, it may work in your favor to hold off on applying for a car loan until you have paid off that chunk of debt. That way, you may be eligible for lower interest rates or increased loan amounts. 

Two popular debt management plans are the debt avalanche and debt snowball methods. With the debt avalanche method, consumers start with paying off their most expensive debts first and then work their way down to smaller expenses, similar to how an avalanche begins as a massive formation of snow and decreases in size until it is nothing. The snowball payment method involves starting with your lowest balance and working your way up to your most expensive balance, similar to how a snowball starts off as a small clump of snow and can continue to grow in size. 

Build and Contribute to an Emergency Fund

Along with having a budget and a financial plan, it is also in your best interest financially to have a savings account that you contribute to regularly. Your emergency fund can act as a safety net should you come across unexpected expenses while you are working on paying off your debt. Work savings account contributions into your budget so you can save money and take care of your current debts all at the same time. 

Don’t Be Afraid To Ask For Help if You Need It

Everybody falls into financial trouble from time to time. If you find that you need some extra help getting your finances back on track, don’t hesitate to reach out for help! There are many free and paid resources that can help you sort through your debts, expenses, or other bills that you may be having trouble paying. There are also credit counseling services that can connect you with quality credit counselors who can give you helpful advice on how you should handle your current financial situation.

Tips for Paying off Debt Faster

When it comes to paying off loans, the faster you can pay off your balances, the better. Below are some tips you can take advantage of that may help you pay off your debt quickly. 

Consider a Debt Consolidation Loan

If you have multiple loan balances you are struggling to keep track of, it may be helpful to consolidate debt into a single loan. There are many types of personal loans and installment loans that would work great for debt consolidation purposes. Combining all your debts into one loan can help you reduce the number of loan payments you are making each month, and it may even help you save money on interest rates or other loan fees along the way. You may even be able to develop a new debt management plan that allows you to pay off your loans faster than the designated payoff date on your original loan contracts. 

Contribute More Than Your Minimum Monthly Payment Due

Another great way to make sure you pay off your loans faster is to contribute more than your minimum payments due or make additional payments each month. However, before you take advantage of this tip, make sure your lenders don’t charge prepayment penalties. A prepayment penalty is a type of charge lenders put on borrowers who make their loan payments before their designated due date. Typically, loans that have prepayment penalties are considered predatory because they discourage borrowers from being financially responsible and paying off their debts early. 

Cut Back on Unnecessary Expenses

While working on getting out of debt try to cut back on unnecessary expenses. These kinds of expenses may include eating out regularly, spending money impulsively, or subscriptions you have that you no longer use. Instead of spending money on things you don’t actively need in your life, you can use those funds to make your loan payments. 

Cutting back on unnecessary spending will also help you establish your wants vs. needs. Wants are things that we desire to have but do not need in order to survive. Streaming subscriptions, eating at fancy restaurants or making impulsive purchases are all examples of spending money on wants. Needs, on the other hand, are things we need to have in order to survive. Shelter, water, as well as basic foods and clothes, are all examples of things we need to be spending money on. 

Consider Aids Like Balance Transfers or Negotiating Debt

If you are dealing with overwhelming credit card debt specifically, you may find a balance transfer card helpful. Balance transfer credit cards are suited best for people who will be able to pay off their credit card debt within a few months and are able to wait for their balance transfer to process. Also, keep in mind that balance transfer credit cards may also come with additional fees, so make sure you can afford those charges before you sign up for a balance transfer card.

For other types of debts, you may consider negotiating your balance with your various creditors to see what they can do for you. While negotiating debt likely will not eliminate your loan balances, there is a chance your lender will work with you to reduce your balances. 

Stop Charging and Borrowing Until You Are Debt Free

To prevent yourself from acquiring more debt, try not to use your credit cards to apply for new loans until you have paid off your existing balances. When you stop using your credit cards and avoid new loan applications, you lower the chances that you will have to adjust your original debt management plans.  

Check Your Credit Report Often

It’s also a good idea to check your credit reports often so you can keep tabs on your most recent credit score and financial history. When you are familiar with your credit reports and financial habits, you may be able to identify potential errors on your report quickly before they can cause lasting damage to your overall score. Furthermore, checking your credit reports often may even act as a motivational tool when it comes to paying off your debts. As you lower your balances and pay off loans, you may see your credit score increase over time! 

Earn Extra Cash 

If you are already struggling to budget money on a low income, you may not have enough left over at the end of each month to make increased or extra payments on your loans. Instead of just keeping your head above water by making minimum payments every month, get ahead of the game and contribute more money towards your loan debt with funds from an additional income source. 

One way you can start earning additional income is by getting a second part-time job. If you have plenty of free time, you may consider getting a part-time job at a restaurant or brick-and-mortar store. Or, if you have limited means of transportation, you could consider getting a remote side hustle. 

You may also forgo working another job altogether and earn extra cash by selling unwanted clothes, appliances, or other items around your house. Try selling gently used things you no longer want or use on websites like eBay, Amazon, or Craigslist. You may also consider having a garage sale to get instant cash from selling your things.  

How Much Debt Is Too Much Debt?

When do you know your debt is getting out of control? The first sign that you may have too much debt is if your loan and credit card balances are making it difficult to pay for your basic living expenses. If you feel your debt is becoming overwhelming, it may be time to try debt consolidation, credit counseling, or other debt-relief options.  

Another way to tell that you may need to readjust your current debt management plan is if your bad debts heavily outweigh your good debts. Good debts are loans that give the borrower something in addition to funding. Two common examples of good debts are mortgages and student loans. With these types of loans, borrowers are receiving a home/property or a higher education in addition to their loan funds. 

Bad debts are loans that give the borrower nothing other than money and generally don’t set borrowers up for financial success. The most common example of bad debt is payday loans. With this type of funding, the high-interest rates and short repayment terms can put borrowers at risk of falling into a cycle of debt. 

How Does Debt Affect Your Credit Report?  

Debt can affect credit reports and a consumer’s credit history in several different areas. Whether these effects will be positive or negative will depend on how the borrower handles their debt. 

Borrowers who make late payments, fall into predatory lending traps, or keep high balances on lines of credit risk having their credit scores decline over time. Comparatively, borrowers who consistently make timely payments, make smart funding decisions, and keep low credit utilization ratios have a much better chance of improving their credit over time. To maintain the health of their credit score while dealing with debt, borrowers should make timely monthly payments and avoid applying for additional funding unnecessarily.

What Is a Credit Utilization Ratio?

Your credit utilization ratio is the comparison of how much available credit you have at your disposal and how much you are currently using. Generally, credit bureaus recommend that borrowers keep their credit utilization at around 30% to maintain a healthy credit score. 

What does a credit utilization ratio at 30% look like? Say you had a credit card with a credit limit of $2,500. If you carried a balance of $750, your current credit utilization ratio would be 30%.  

What Is a Debt-to-Income Ratio?

A consumer’s debt-to-income ratio refers to how much debt they have in total compared to how much income they bring in regularly. Collectively, a borrower’s outstanding debts accounts for about 30% of their total credit score. Your debt-to-income ratio encompasses all types of debts, everything from student loans, cash advance loans, installment loans, mortgages, and even quick cash personal loans are included. Your income includes any type of revenue you bring in regularly, like a paycheck from your job, as well as any investment or assets you may have. 

How Long Will It Take for Debt To Affect Your Credit Report?

Credit bureaus typically refresh their data regarding your financial history and habits every month. You can access an official credit report from one of the three major credit bureaus at least once a year for free. The three major credit reporting agencies are Equifax, Experian, and TransUnion. You may also check your unofficial credit report with a soft credit pull any time you like, also for free. While the credit reports that come from soft credit pulls are not the exact same report that lenders see when you apply for loans, they contain essentially the same information. 

What Happens if You Owe Money and Don’t Pay Off Your Debt?

Some consequences you may encounter if you are late or miss payments on your loan are: 

  • Increase in interest rates
  • Late fees / other finance charges
  • Potential loan default

However, if you owe money and fail to keep up with your scheduled payments, there are other consequences you may suffer from besides late payment fees. If enough time goes by when lenders receive no loan payments from a borrower, they may sell the delinquent debt to a debt collector. Debt collectors are financial institutions that purchase delinquent accounts from lenders. Lenders may sell the outstanding debt to debt collectors in order to make up for any financial losses they may have suffered from the defaulted loan. 

Before you stop making payments on your debt, ask yourself if the following options would work for you. 

  • Debt Settlement – There are debt settlement companies willing to work with borrowers and help them reduce the amount of debt they owe to various creditors. You may also try to negotiate debt settlement on your own, but you may find it much easier to work with a debt relief company. Before you choose this option, be aware that debt settlement may have a negative effect on your credit score. 
  • Bankruptcy – If debt settlement doesn’t work for you, you may consider declaring bankruptcy as an absolute last resort. Declaring bankruptcy is a major financial decision that will have a drastic impact on your credit score and financial history. 

A Note From CreditNinja on Managing Loans

Managing your debt is crucial to increase your purchasing power and avoid financial issues. There are various ways to achieve debt relief, it’s just a matter of determining the best course of action for your unique situation. 

CreditNinja offers free financial resources that can help you better manage your debt. You can learn how to save 1000 in 30 days, how to do the 100 envelope challenge, how to save money on a low income fast, and much more! 


  1. UN Warns of Soaring Global Public Debt | UN
  2. How To Get Out of Debt | Consumer Advice
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