Get out of debt fast with these 6 quick tips
If you find yourself going deeper and deeper into a debt trap with no foreseeable solution, think again! We are here with just the tips to ensure that you are able to get out of debt faster than the pace at which you were going. Bear in mind that once you have decided to seriously take control of your debts, making the same possible requires unbridled financial commitment and discipline. Making a few fundamental changes to your lifestyle can ensure getting out of debt faster with the same income level.
This practice obviously gets easier over time as you begin to develop better spending habits. Don’t put this off anymore, the sooner you start, the easier it will be to take back control of the situation.
Say goodbye to borrowing for a while
There is no way that one can get out of debt by borrowing more money. This means completely halting habits like swiping credit cards for your lifestyle needs or availing of new loans. Focus instead on curtailing expenses so you have more of your income on your hand. Consider the true cost of swiping a credit card and taking out new loans.
Live on the cash on your hands as a key change you introduce in your financial management habits. In the early stages of your debt management plan, new credit for the purpose of debt consolidation is not effective. Understand the size of your debts put together and whether or not it is in a position where a bigger loan can help close all outstanding accounts before you opt for one.
Try the tested debt snowball method
Implementing a solid debt payoff strategy is an absolute imperative in the process. The first thing to do is to come up with a plan that maximizes your payoff schedule. A proven way to get out of debt fast is using the debt snowball approach. In this, we have to direct most of your debt-related funds towards only one of your debts, which will then be receiving a higher repayment amount and be paid off faster. Once that debt is paid off, you reallocate these funds towards another debt and repeat this process until all debts are repaid in full.
As a result, the extra fund’s snowball, even as the money you are allocating towards repayment stays the same. For example, if you have dedicated 20% of your monthly income to paying off debts, the absolute number for which comes to ₹300 from your income, and have three ongoing debts, you would be paying ₹50 to one, ₹50 to another, and ₹200 to the 3rd. Once the third is paid off, you’ll pay ₹50 to one and ₹250 to the other.
To make the process most effective, the total amount you direct toward repaying debts should remain consistent. If you have been putting ₹300 toward debts each month, and one of your debts are paid off, you must still continue to put ₹300 toward debts in the following months. If you are trying to choose which debt should be paid off first, always go for the one with the highest interest rate but it is also subject to your situation.
Pay More Than the Minimum Payment
One of the simplest ways to get out of debt fast is by reducing expenses and incrementally multiplying the money you are putting towards repayment. You should try to put as much of the funds available to you as you can toward debts every month. Higher than your average-sized payments will accelerate the process of you becoming debt free quickly. While creating a budget to get out debt effectively, set a minimum amount, preferably 20% of your income towards repayment. Make it a rule to pay more than the minimum amount due towards each of your debts.
Consider transferring balance and consolidating debt
If too many debt payments are leaving you cash-strapped, you may look at a balance transfer or consolidation of debt. While the same may sound like a good idea, clubbing the balances of multiple credit accounts without the stringent combination of budgeting, lifestyle changes, and on-time payments, you can end up finding yourself deeper in debt than when you started off. You must also consider the need to avoid replacing good debts with bad debts.
To simplify matters for you, here’s an example: a good debt is a mortgage loan, which basically helps you keep a roof over your head when you need liquidity for other purposes. A bad debt is when you are financing discretionary expenses with a credit card. They also come with high-interest rates.
Renegotiate Credit Card Debt
Considering that debt management is your only priority, renegotiating your credit card bill also comes in as an option. This will give you the option to pay a lump sum amount of your bill instead of costly monthly payments. This is known as debt settlement. Going through this process is also not difficult, because all you have to do is call your creditors or lenders and request a lower interest rate on your credit cards.
If you have a positive repayment history your request may be considered. You can also negotiate credit card fees and work with your creditor to come up with a new interest rate or waiver on part of the fees or recurring charges you face. Most of these companies are eager to keep your business and will probably readily help you out.
Seek help where it is necessary
Sometimes the situation may be so far gone that you may be required to seek professional help to become more financially savvy, and reduce your tendencies and need to incur debts. The one thing to understand is that increasing your income is not necessarily the way to stay out of debt. A lot of high-income individuals stay mired in debt. All that matters is aligning your spending habits to match your lifestyle. You do not need to shoulder the burden alone, a qualified financial coach can help you set up just the right repayment plan to get out of debt at the earliest.