Owe student loans, credit card bills or mortgage loans? Paying off debt can be taxing and might ruin your financial dreams. Here are the best strategies that you can use to get out of debt.
We all are surrounded by debt once in our life and in some cases more than once. Irrespective of debt being in form of bills or loans, we all want to get rid of it as quickly as possible. With moneylenders calling frequently to collect their debt, our stress level increases and we look for ways to get out of debt. Here are some of the best ways to pay off the debt that we have gathered from the experiences and insights of experts and other people on debt management.
1. Use Snowball Approach for debt relief
When it comes to debt repayment, first thing that pops up is to start paying it through snowball approach. A typical debt snowball method includes tossing all you have at the debt having the lowest balance along with paying off minimum monthly amount on other debts. After paying off that debt, use the money and snowball it to pay the next debt with the lowest amount. This ways you are paying off the exact same money every month till the time you are debt free.
Key to debt help is snowball as it does not need any changes in lifestyle while ensuring that you to get out of debt fast. Moreover, it ensures that the faster you payoff the loans the less burden is there of interest.
2. Double up the debt payment
Another excellent strategy for debt reduction is doubling up the debt payments. As soon you get some extra money, you should use it up to double the amount of your debt payment. This would reduce the principal amount on the debt faster and ultimately reduce your interest amount on the loan as well. Use the birthday money; overtime working pay, tax refund or any other payment to pay off you debt faster. If you can pay off the entire amount, do that to be debt free and save money.
3. Duck a new debt
In case you are drowning in debt, don’t take another loan to pay of your existing ones. Apart from paying the origination fee of the loan, it is important to consider that in comparison to credit card rates, interest rate of personal loans can be lower but then you will have to pay monthly amounts for a period of time that could be more than your credit card debt. This implies that you can save money but the monthly payment can be more that can reduce the cash flow.
It would also be wise to not go for the attractive low-interest credit cards guaranteeing cash backs, as it can get a little bit cash back every month but to get that money, you intend to spend more. In the long run, these cards are not beneficial; instead paying with cash is the best advice. Try and avoid mortgage as well and in case you are obligated to take one, save more for down payment so that the monthly amounts can be lower. This will also make you qualify for lower interest rate and hence it is an excellent strategy to pay off the debts.
4. Debt consolidation
An excellent strategy for debt management is debt consolidation. Converting many debts into one single payment, mainly with lower interest rate with the help of debt consolidation can help you manage your debt easily and turn out to be less expensive. But, only a good credit can make you qualify. Two strong debt consolidation options comprise of debt consolidation loan or zero per cent interest, balance transfer credit card. To reduce the debt amount, choose the one that qualifies you to pay less interest.
5. Quit at the right time
There are times when you can be drowning in debt. You can have to pay more than 50 per cent of you yearly income to clear your debts and still it could take years to be debt free. This can come in the way of your financial dreams like down payment of a house or reserving for retirement. Debt relief solutions such as debt management plans can help you get rid of the debt fast but it is essential to know when to quit and move past your debts.
Living with restrictions can be temporary and you have to take loan at some point of time. While debt can be an easy and fast option but paying off can be strenuous. Don’t let it bring your morale down and get creative with paying off loans with these excellent strategies. Use them wisely and stay debt free.