Debt-Paying Advice for Businesses with Unsteady Income

The biggest question that hovers in the minds of business owners and ordinary middle-class people is how to clear my debt quickly? Well, this article is dedicated to answering all your questions related to paying your debts with an unsteady income that too without facing any problem.

We all have at least taken a loan once in our life from our friends, relatives, or lending institutions. For a business with less cash in hand, sometimes it becomes indispensable to borrow some money from a known person or NBFCs. The ones with a steady source of income or ones with an established business don’t face many difficulties to clear off their debt timely. But, any new venture which hasn’t reached the point of steady income from their business may face a pullback at the month-end while repaying their debt timely.

Today we are going to share some tips through which you will get more control over your money. Moreover, these tips will also help you understand your money and manage your expenses better and how to clear debt.

How to Clear All Debts with an Unsteady Income

1. Track your money

These days, many applications are available on the App Store to help you manage your income and expense status on their platform. Even some apps directly link with your debit or credit card to keep track of all the expenses. This way, you would have a clear record of all your money which will help you to understand your financial status better. Most importantly, you will be aware of your current financial position, which will help you store some money for the month-end bills or EMI.

2. Budgeting is always the key

Even big nations always come with a strategic budget every fiscal year so that they can allocate their capital systematically wherever it is needed the most. So, budgeting is not only limited up to nations and financial institutions. Instead, it is the best way for ordinary people to allocate their capital strategically. You can also start budgeting either monthly, quarterly or yearly. But, for an ordinary person or a business person, monthly budgeting is highly advisable as most of our bills or EMI’s fall at the month-end.

3. Spend on your needs

In marketing terms, we define ‘need’ as necessary items like groceries, bills, rent, etc. But there is also a different term known as ‘wants,’ which means our desires, luxury, and unnecessary things. If we are bound to some sort of debt, we should always try to stop our income from being spent on ‘wants’ during this period. By doing so, you will be left with a handful of cash at the month’s end.

4. Increase your source of income

One of the best tips you will hear about repaying your debts on a timely basis is to increase your income by 10-20% or more. This way, you can allocate those increments in your income towards debt payments every month. The best way of doing such is to increase our passive income or own some assets that will pay you every month without you working for it.

5. Build an emergency fund

This is another life-saving tip that will work as an angel during a financial crisis or any other unwilling events. For instance, let’s assume that you have a certain debt on your shoulder and you spent all your income on something more critical like medical bills. At that time, the lending institutions won’t consider this, and you will end up paying more interest, and your credit score will climb down the ladder. So, to prepare for any such situation, it is highly recommended to save 2 to 3 months of your net income in an account or cash.

6. Never ever take a loan to clear off your debt

One of the biggest traps that people usually fall for is that they typically end up taking a loan to repay another loan during a crisis. It is indeed one of the biggest mistakes one can make that will eventually make that process a habit, and in the end, you will be left with multiple debts on your balance sheet.

7. Set reminders on your smartphones or other devices

This tip can come out to be life-changing sometimes because there may be certain occasions in which you may forget about your repayment dates. So, setting up a reminder on your devices would be a wise choice in this case.

Now that you learned about tips that have almost solved your question regarding how to clear debt fast? Let’s now jump onto another term that you may be highly familiar with, i.e., CIBIL score. This score is very important for you to get eligible for borrowing and banks and other lending institutions consider it as a crucial factor. If you don’t pay your EMI’s on a timely basis, you may face a negative effect on your credit score, a.k.a CIBIL score.

What Is the CIBIL Score? Why Is It Necessary?

A CIBIL score or a credit score is a three-digit number that ranges from 300 to 900. These scores are derived from your past credit history and your payment behaviour over time.

A good credit score above 700 is required for you to get eligible for EMI purchases or any future loan applications. If you fail to repay your debt or take loans excessively, it may negatively affect your credit score, and later on, lending institutions will hesitate to approve you for providing loans.

How to Maintain a Good CIBIL Score?

There are a lot of ways through which you can maintain a good CIBIL score. The following ways are mentioned below in detail-

Repay timely- First and foremost step to maintain a healthy credit score is to repay your debts to your lending institutions timely without failing.

Minimise the number of accounts- Don’t open multiple accounts on lending platforms. By doing so, it will reflect that you are financially unstable and will affect your rating overall.

Age your account- Whichever platform you use for borrowing, you can stay active on that for a longer period. The longer your loan account stays positively active, the higher the credit score you will yield at the end.

Opt for long tenures- Whenever you take a loan, always try to choose a longer tenure for repaying it. It will lower your monthly EMI further, which will incur less burden on your head at the month-end. As a result of which, you will follow the EMI dates religiously, which will reflect positively on your credit score.

Conclusion

We can conclude this article by saying that an unsteady income is just a small problem for business owners. And, this problem can never become a hurdle while paying off all your debts quickly without facing any penalty. You don’t need to wonder anymore how to clear all debts. All you have to do is to follow the tips given in the article religiously, and it will certainly reward you in the end.

Later on, if you follow those seven tips religiously and with discipline, this will not only keep you burden-free rather you will develop a healthy credit score over time. After that, you will be able to get bigger loans and help from many lending institutions to grow your business further.

Also Read:

1) 10 Tips for Network Marketing Success
2) 10 Money Lessons for Businesses from the Covid-19 Crisis
3) 8 Simple Steps To Pay Employees Of Small Business
4) Top-10 Oldest Small Markets in India with Great History

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FAQs

Q. Can I borrow some money from others to pay off my debt during the business off-season?

Ans. No, as mentioned in tip number 6 above, you should never take a loan for paying off another loan. Instead, prepare for these situations beforehand and keep an emergency fund ready to help you out in any such situations.

Q. I had to shut down my business for some reason; how to clear all debts quickly?

Ans. Well, in this case, if you have an emergency fund ready with you, then clear all your debts as quickly as possible or find a new source of income quickly to regain your financial stability.

Q. My business is running on losses. Can I skip the EMIs for some months?

Ans. Never skip your EMIs as the institutions will charge more interest and accumulate huge late fees at the end. Moreover, your CIBIL score will also go for a toss and will be heavily affected by this behaviour.

Instead, manage your daily expenses, do necessary cost-cutting during this period, and clear off your EMIs on a timely basis. This will increase your credibility, which will help you in getting more loans with larger amounts in the future.