Don’t Let Borrowing Money Be the “Debt” of You

While being in debt isn’t necessarily a bad thing, how you manage it can turn your debt into either a good investment for your future, or a never-ending headache that slows down your progress. But don’t worry: there’s always a way out. We talked to Melissa Velasco, Head of Customer Recovery at BPI for a quick guide on how to keep your debt at a manageable level, making your borrowed money work for you instead of against you.

1. Know your situation.

Start by creating a detailed overview of your debts, including amounts and interest rates. This will give you a clear picture of your financial situation, prioritize your repayments, and understand the scope of your debt.

“Understandably, debt can be overwhelming but with the right strategies and mindset, it is very possible to overcome this financial challenge,” Melissa said. 

She advised those with debts to communicate openly and honestly with their lender or creditor. Explain your present situation and possibly explore the potential solutions together. 

2. Prioritization is key.

If you have multiple debts, it’s best to pay off the debt with the highest interest first. This will avoid you having to pay for more interest over time. Create a budget and allocate your payments according to the interest rate. 

Melissa also suggested taking steps to be more financially healthy: create a budget to track their spending and set financial goals.

3. Consolidate wisely.

It might be a good idea to take out a personal loan to pay off your existing debt, but only if you can get a lower interest rate than what you currently have. This will allow you to pay less interest and make it easier to track your payments once it’s all in one place.  
 
Melissa said creditors and lenders may have payment options to assist them such as payment deferral, payment plan, and interest reduction making the payments more manageable and affordable. Early discussion with their creditor may avoid late payment fees and potential damage to their credit score.

4. Every peso counts.

Keeping track of every peso that goes out of your account will allow you to see where you’re spending the most and adjust accordingly. Savings in small places will add up, too — consider cooking at home by batch, buying groceries in bulk, and canceling those unnecessary subscriptions. Melissa advised young people to “live within their means, take time to think before making purchases, especially large ticket items.”

5. Ask the pros.

Everyone’s financial journey is different. Financial experts can give advice that’s tailor-made for your situation, and help you get out of debt in the quickest way possible. Don’t be afraid to ask help from the pros — they’re here to help.

“Debt/Loan can be a strong tool in achieving their financial aspirations but should be used strategically and efficiently,” Melissa said. Conquering debt is a challenge, but it's achievable with the right mindset and strategies. Stay focused, be patient, and remember to celebrate your progress along the way.  
 
Melissa advised: “Setting financial goals will help them stay motivated and focused on their set budget. Lastly, consider consulting financial advisor for a better financial perspective and guidance.”

 
You've got this!

To talk to one of BPI’s financial experts or visit a BPI branch near you. Want more financial tips like this one? Visit NEXT by BPI Preferred’s The Program.