Lots of people get in debt due to emergencies like medical and business loss. But apart from that; there are other reasons for people falling in debt and the most common reason is living beyond their means. People like to buy things because they want them and not because they need them. They would also love getting out of debt but they are not quite sure of the best way to do it or where to get it started.
After a thorough research and getting out of debt myself after marriage, I have complied a list of proven suggestions to get you started.
The more of these you can apply, the faster you will get out of debt.
1) Always pay more than the minimum payment
Ensure you always pay more than the minimum payments on your credit cards, overdraft, loans or EMI.
If you only make minimum credit card payments, it will take forever to pay off your balance.
That’s because the majority of your minimum payments will go towards paying interest fees rather than reducing the amount you actually owe i.e. the principal.
If you want to pay off your balance quickly, pay as much extra as you can afford.
Most of us have wishes and wants that are bigger than our pay cheque. If you want something, don’t buy it unless you have the money. If you can be satisfied with less, you can use the money you save to pay down your debt.
3) Pay Off Your Most Expensive Debts First
One of the smartest tactic for getting out of debt is to make minimum payments on all of your debts and credit cards except for one.
Chose the one debt that is charging you the most interest and focus all of your extra payments on paying off that one first.
Once your most expensive debt is paid off, take all of that money that you were paying on that first debt and focus it on the next most expensive debt.
Continue this method as you pay down each of your debts. Soon you will be left with your least expensive debt to pay down last.
This tactic will get you out of debt quickly. And you will feel encouraged as you see your progress.
4) Buy A Good Used Car Instead Of A New One
You can save yourself thousands if you buy a quality used car rather than a new one.
The money you save can help you get out of debt much faster. If you still choose to buy a new car, choose a reliable car with low maintenance. And keep it for as long as possible.
5) Diversify Your Income Stream
It can be getting a second job, picking up an extra shift or two frequently, commercializing a hobby or a skill set you might have, rent a room in your house.
These are some of the common ways in which many people make some extra income.
For this to work, you must apply all of your extra income to debt repayment.
6) Get A Consolidation Loan
See if your bank can help you consolidate all of your consumer debts into one loan with one payment at a lower interest rate. This can be the most helpful step in getting your debt paid off.
Getting a debt consolidation loan will only help if you create a budget that does two things:
- It prevents you from having new debt while you’re paying off the consolidation loan.
- It allows you to save a bit of money every month.
Savings isn’t something that someone in debt thinks, but if you don’t have savings, you’ll probably need to use your credit cards again or ask from someone midway through your loan and end up having more debt in case of any emergency.
This could leave you in the same place as before or even worse off.
So the key to benefiting from a consolidation loan is having a budget to ensure you keep your spending under control and set aside some money each month for emergencies or unplanned expenses which will inevitably occur.
7) Consult A Credit Counsellor
If you are in debt and are really struggling for a way out; start by speaking with a credit counsellor.
Find out what programs are available to help you deal.
A reputable credit counsellor will explain all of your options and help you choose the option that makes the most sense for you in your situation.
The sooner you start dealing with your debt, the sooner you’ll pay it off.
Start by trying at least one or two of these strategies.
If you need some help getting started with a plan contact a reliable credit counsellor. The counsellor will review the whole situation with you and then suggest options to help you reach your goals.
Do let us know if you have tried any of the strategies in the comments below.