How to Reconstruct Your Debt

Generally, Filipinos have a lot of debts due to the poverty experience in the country. If the common saying of “isang kahig isang tuka” was true before which means that your income is just enough for your food, the situation for Filipinos are different now. It’s not even enough to buy basic necessities in life unless you incur debt.

To get out of a very stressful situation when you are left nothing in your salary and you are surviving through borrowing money from your friends or family or having dependence with your sustenance by purchasing on credit through a “sari-sari” store near you, debt restructuring is advisable for you. Too much debt could drown you and your family leading to frequent fight against family members. So here are some tips on how to restructure your debt.

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1. Determine which debt is the most onerous and pay them first. Onerous is a legal term which means excessive in interest. In the Philippines, the onerous debts are usually coming from informal lenders such as “5 6” in the market. This kind of debt is disadvantageous because out of 5 pesos, you pay 6, and if you incur this kind of debt that would increase the interest monthly which is payable in two months, you are actually paying 20% interest per month. The best way to incur debt is through engaging in credit cooperatives or borrowing from the banks that only require 1% to 3% monthly interest. If not, if you have friends or relatives that are wealthy enough who are willing to lend you money, go to them instead.

2. Make a debt elimination calendar and determine on how to pay them on a certain period of time. For instance, you can list your debts and determine which to pay first, second, third and so forth until everything is paid. As mentioned, you can pay first those which have bigger interest, then the next to eliminate everything.

3. If you are a person who does not have the cash to pay debts, you can borrow money to pay a debt that has excessive interest until you can recover for everything. Some cooperatives or lending companies would buy out your debt from another.

4. Do not incur another debt that is related to consumer’s purchases and not necessary. For instance, don’t buy gadgets for upgrading purposes just to be of style when given the fact that you have still many debts to pay. Do not get another refrigerator on installment when you have other monthly installments to pay. You can have them when you are financially stable enough.

5. Save money first even just a coin or two. It seems impossible to save but this can help a lot by having a small piggy bank for emergency purposes with even a peso or two daily. This will save you from emergency cases that you have something to spend.

6. Since other lending companies understand your situation, try to talk to them about debt restructuring. They can offer you advices and schemes on how to reduce your debt.

7. Sell gadgets, excess things in the home that can be converted to cash to pay your debts. There are many things in the house that can be subject to garage sale that your neighbors be interested.

8. Don’t hesitate to ask help from wealthy relatives or friends who can help you with your situation. If they can lend you money without interest to pay your excessive debts, the better.

9. When everything is too difficult, file for bankruptcy. You can tell your creditors that you are bankrupt because you are protected under the law under the constitutional provision that “no one shall be imprisoned from nonpayment of debt”. They will find ways to help you pay your debts.

Lastly, one way to stay out of debt is to minimize unnecessary expenses like shopping for unnecessary things not needed for the family. Finding additional income or sidelines can also help in debt reduction. You can stay out of debt as long as you have the desire to do it.

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