How To efficiently Manage Debt as a Single Parent?

Debt

The burden of debt is one big reason single parents often lead a troubled life with finances. If you are a single parent and are in a troubled life, then you have to look back and see, why you are in a problem. Many mismanagement, small and big financial decisions can lead you to big imbalances later on.

Single parents inherit a lot of debt

If you are single because of a divorce, or because of the spouse’s premature death, then you probably have inherited a lot of debt from the incident. It’s a common thing that after a divorce the expenses and loans all that were taken together as the couple gets split. And when they get split, then you inherit the half or a considerable portion of it. In the case of the spouse’s death, you become accountable for all the debt the spouse had on his or her shoulders. In this way, you get a lot of debt on your shoulders just because of being single.

If this is the case, then you automatically get into a pressure situation from the beginning as the source of income in the family comes from you only. Having only one source of income, and debt to pay back already creates a burden on you, which leaves little room for you to save or create emergency funds. Still, single parents continue to live with their debts and continue paying back in many cases through the tenure to get off the burden. But sometimes more unfortunate things happen, and you do not get so much lucky to get debt free soon.

You may get into more debts with growing expense

While expenses grow for a household as kids grow, the source of income may still stay the same. And you may not have too much money in hand. If that is the case with you, and you already are fighting with previously inherited debts, then you will have to think of either increasing your income or decreasing the expenses. Sudden expenses like increment of education fees need for stuff for education, tours, and excursions, extra-curricular activities, etc. are many such things, which burdens the single parent too bad.

Top it up with sudden medical expenses which the insurance does not cover fully, and you will see you have no way out but to take a small personal loan or payday loan, or swipe the credit card. And credit cards were always there with you in the wallet can be swiped for small to big payments without giving in much thought about the debt which is accumulating on that account. Hence, there are so many tough situations, when you are left with no other option but to borrow. And as the single parent, the more you borrow at such difficult situations from various sources, the more you get cornered in life.

Avoid getting into debt

The first thing you may do like the single parent with the knowledge that you have only one source of income is that you do not go into debt. Although this seems a little difficult looking at the modern ways of life, where so many amenities are needed for a better life, and people do get offered for all that in EMIs. It’s difficult to resist the urge to go for EMIs to pay for something and get it home.

Little does the consumer cares that they are taking one sort of loan only by hypothecating the item to the lender who partially pays the whole amount on the consumer’s behalf, and the consumer pays the lender slowly in EMIs that amount with added interest. Hence, all such forms of deals are forms of debt only. And the sooner you understand this thing, the better for you. Hence it’s best to forget that you have a credit card. It’s best to not look at offers with EMIs unless you have the full cash to buy it. And it’s best to take a loan only when you know the terms and conditions, the interest rate, and the EMI clearly, and are convinced that your financial condition will allow you to pay the EMI.

What to see before taking loans?

Before you take a loan, in case, you need to, always check a few things. They are:

  • The rate of interest. Check if you are getting the lowest possible rate of interest for the loan.
  • See if you are getting a longer tenure to pay back flexible.
  • If it possible for you to afford the loan installments for you to pay after taking off all monthly expenses from your income
  • What are the pre-closure charges for the loan if you by chance want to close it early.

After checking all these facts, you should decide if you should go for the loan or not.

How to deal with debt?

Dealing with debts can be a lot easy if you plan things well, and gauge problems fast. If you understand that situation is slipping out of your hands, then you may act soon to bring things into control. One of the major problems you get with debt management is that, while you miss a few payments, and default few, you get your credit score affected in the process. And this is big damage.

The delayed and missed payments get very well reflected in the internal credit report, which gets seen by other agencies that deals with loan approval etc. Hence if you need a car or two wheeler loan, or some other loan later, you may get it rejected for a bad credit score. But if you act timely, and get a debt consolidation loan to settle the dues and manage a new manageable loan, then things can get much better for you at once.

Finally

Debt consolidation is a brilliant way to manage debt on time, and save you from financial burden as the single parent. Life as a single parent is difficult and adventurous. But you still may plan and move on if you know the things that take you out of trouble beforehand.