04 Sep 2024
One of the pressing issues that affects almost everyone in the global population is debt, and OFWs are not immune to it. However, whether one is in his home country or any other country, managing debts efficiently is paramount for anyone who wants to avoid anxiety and unnecessary sleepless nights. This broad reference addresses different ways through which Filipinos can handle their problem of debt, unpacking specific Philippine and global references for debt management. For OFWs, leveraging online money transfer to Philippines services can be a crucial tool in effectively managing their finances and potentially reducing debt burdens.
What is important to determine before going through the types of debt management is first defining common types of debt and their origins. Debt can generally be categorized into two types: There are two broad categories of assets, namely, fixed and current assets.
Based on collateral, secured debt entails the borrower providing the lender with an asset, such as a car or a house, as security for the loans.
Loans incurred through the purchase of property to be utilized as a residence.
Car loans include loans used to finance the purchase of the car.
It refers to the loans offered to borrowers in which the borrower’s assets are pledged to secure the repayment of the loan.
Unlike secured debt, there is no collateral, which makes it very risky to lend in this pool since it usually comes with a higher interest rate. undefined
Huge balance that people incur on their credit cards when they use these cards for buying goods and services.
In the industry, these loans are known as ‘secured,’ ‘real,’ or ‘true’ because they are not backed by an asset.
Delinquent payments are made to doctors, surgeons, hospitals, and other related professional services.
This includes any education loans availed for financing education.
Debt management is the process of employing all the necessary methods that allow to reduce the amount of debt, avoid new ones and enhance the financial situation in general. Here are some tips that can be employed by Filipinos at home and abroad to cope with their debts effectively:
Making a budget is the foundational step towards tackling and eliminating debt. By meticulously tracking income and expenses, individuals can pinpoint areas where spending can be curtailed and funds redirected toward debt repayment. For those supporting loved ones abroad, budgeting becomes even more crucial. Carefully managing finances and prioritizing debt repayment allows for consistent and timely to send money to Philippines, ensuring the well-being of dependents while working towards financial freedom.
All sources of income, whether corporate or personal, shall be listed comprehensively. Enumerate all expense accounts for a month, including fixed and variable expenses, such as rent, utilities, groceries, entertainment, etc. Subtracting everyday expenditures from earnings yields the monthly balance of profit or loss. Any remaining amount should be channeled towards paying debts.
After setting your budget, you should focus on which debts to pay first.
Based on this, the debt management strategy known as the snowball method involves making large payments on the smallest card balances while paying the minimum amount on the other cards. Depending on the size of frequent debts, this method offers psychological satisfaction because the debt is repaid as soon as possible.
Utilization of debt snowball approach where you pay more on debts with high interest rates but make minimum payments on other debts. Overall, this method will incur lesser interest costs in the long run.
If you are finding it difficult to meet all your payments then try to talk to your creditors and try to get some better terms. Present an offer of temporarily suspending payments due or a loan payment deferment.
Debt consolidation, on the other hand, refers to a scenario whereby several debts are paid off with a new loan with a lower interest rate. It can make payments easier and reduce the overall amount of interest one pays throughout the intended payment period.
Here are the types of consolidated debt:
Borrowing cash to consolidate several debts. Individuals and families often use this financial product to address different types of debts simultaneously.
The process of moving the balance that incurs high-interest charges on a particular card so that it is moved to a card that charges a lower interest rate.
Consumer credit is used to pay off other debts in a single customer‘s account.
Following are some of the strategies for Filipino expats:
Having a local bank in your host country can also assist in the management of monetary affairs.
It also lets you minimize the costs incurred due to foreign transactions.
Availability of local banking and Automated Teller Machines within the given country.
To gain access to credit and create a credit history in the host country.
Having scheduled payment of the bills and debts guarantees that such expenses are paid on time, thereby avoiding incurring extra charges for lateness. This is particularly advantageous for Filipinos working abroad who might need help meeting local payment deadlines due to time zone differences. By setting up automatic online payments, they can ensure bills are settled promptly without the worry of missing due dates. This convenient feature allows OFWs to focus on other priorities while maintaining financial obligations.
Changes in foreign exchange affect to send money online to Philippines which the family members usually receive in Philippine currency. Track the exchange rates and use the time to transfer the funds the recipient can receive as much as possible.
Practical approaches to saving and investing can help establish a financial buffer and source more income to tackle debt.
It is recommended that you have an emergency fund in an accessible bank account that covers three to six months of your living expenses.
Compare various investments, such as equities, fixed securities or mutual funds, which, if invested in the long term, can create wealth.
For Filipinos living abroad as well as those at home, managing debt is essential to good financial health. Filipinos may take charge of their debt and move towards financial stability by making a budget, making debt repayment a priority, negotiating with creditors, consolidating debt, getting professional assistance, raising their income, and making use of online resources.
Those who live overseas may improve their debt management even more by using online services to make a money transfer to Philippines, being aware of currency exchange rates, and keeping up with financial product developments. With the appropriate approaches and commitment, Filipinos are capable of effectively managing their debt and achieving financial freedom.
Budgeting makes it easier to keep track of earnings and outlays, find places for savings, and set aside money for debt repayment.
Pay your bills on time, reduce your credit card debt, avoid applying for additional credit, and check your credit report for mistakes.
High interest rates, a lack of financial knowledge, joblessness, and commitments to one's family.
Establish unambiguous financial boundaries, offer consistent assistance, promote savings, and impart financial literacy to family members.
Examine the offerings of the Bangko Sentral ng Pilipinas (BSP), the Securities and Exchange Commission (SEC), and the Department of Social Welfare and Development (DSWD).
