Runaway debt is one of the worst nightmares for anyone, not just because of the negative impact it can have on your credit score, but also due to the strain it can add to your life.

If you have a relatively strong control over your finances and are able to maintain a decent credit, chances of you having to deal with runaway debt are minimum. Unfortunately, life is unpredictable and there will be times when you end up finding yourself with massive debts that you have trouble repaying.

This is when you should consider certain debt-repayment hacks to get your finances under control and get your life back on track. Given below are some key strategies in this regard.

1. Transfer Balance Wherever Possible

If you are burdened with huge debt on your credit card but are confident of being able to pay it off within a short period – say, six months or one year – using a balance transfer facility would be worth considering.

Balance transfer is an option that many banks provide wherein you will be able to shift the amount payable on one or more cards to another and pay off the debt interest-free within a specific period. However, remember that if you are not able to pay up within this period, the interest rates may skyrocket, landing you in deeper trouble.

2. Follow the Stack Method

If you have debts payable across multiple financial products, you could considering using the stack method. This entails you paying off debts with the highest interest rates first while dealing with those with lower interest rates by paying the minimum required amount.

The logic behind this method is that after you manage to settle up debts that have high interest rates, you will end up with more funds to pay off lower-interest debts as you will be bringing down the interest you are liable to pay.

3. Offset with Low-Interest Loans

If you are able to find a loan that is offered at a lower interest rate than your existing debt, by all means, consider taking the former and paying off the latter.

For example, if you are liable to repay your credit card debt at 26% p.a., find and take a personal loan worth the amount due at a rate of, say, 8%. And voila, the 26% interest payable on your debt has now shrunk to 8%.

You can use websites like Bankbazaar.sg to get an idea of the personal loans available with the interest rates applicable to them.

4. Don’t Forget to Save Money

When overwhelmed by massive amounts of debt, you might decide to avoid saving any money until all the debts are settled up. This wouldn’t prove to be a wise decision in the long run as you will never be able to know when there may be an urgent need for funds.

Try to save as much as about three to six months of your living expenses before beginning to pay off your debts. This should ensure you have the necessary support if anything goes wrong.

5. Reverse Mortgage Your Way Out

If you own a private property, you could use it as a collateral and borrow money. This method is known as cash out refinancing or reverse mortgage. The advantage for you is that the interest rates applicable on cash out refinancing are considerably low.

However, even as the lower interest rates might appeal to you, remember that the risks associated with cash out refinancing are quite high. If you are not able to settle up this loan, you could end up losing your property.

6. Restructure Your Debt if Needed

If, in the unfortunate event, you are not going to be able to repay the loan, consider approaching the bank directly or through a debt counsellor to get the repayments adjusted. At the end of the day, banks would prefer you paying as much as possible rather than not paying anything at all.

Do remember that this should be your last-ditch attempt because any move from the banks to restructure your debt could take a hit on your credit score. On the bright side, it’s better than what a default on your loan would cost you.    

If you are really lucky, your lender might decide to lower the amount payable. But even if that doesn’t happen, you can attempt to get the interest rates reduced or get a temporary halt on the interests.

The points given above should give you brief idea on how to go about managing a runaway debt. As you pay off each debt that you owe, remember to close the lines of credit to avoid being tempted to borrow again before you are able to make a full financial recovery.