Getting out of debt isn’t easy. Most of the time, your monthly salary will go to your debts, leaving you with almost nothing for yourself and your family. But if you decide not to pay your debts, it will increase until you get trapped in a cycle full of financial problems.
Fortunately, however, there are several ways that you can opt for if you want to get out of your debt problems as soon as possible. It will be a long road, and it won’t be easy, but with perseverance and the determination to be financially free of debts, you’ll be getting out of this financial hell soon. So, how exactly do you get rid of your debts? Here are some ways how.
Pay More Than the Minimum Payment
One of the first things you should consider is figuring out how much you can pay more than the minimum amount you’ve been paying. Of course, if you can’t, that’s all fine and dandy, but if you can pay more than the minimum amount, then you should do so since it’s the highway to being free of debt.
So, let’s say you have a $15k balance on a credit card, with a 17 APR and $450 for your minimum monthly payment. If you only pay the minimum every month, it will take almost four years to pay the debt completely. You’ll be paying about $5.5k interest.
However, if you opt to pay $550 a month or at least $100 more than the minimum, you could pay the debt completely in under three years and with only $4.1k in interest. In short, not only will you get out of debt as soon as possible, but you’re also paying less in interest.
Snowballing
No, we’re not telling you to throw snowballs at your creditors. That will just get you in trouble. What we mean by snowballing refers to a strategy for debt reduction if you have multiple sources of debt. This debt repayment strategy requires you to pay the minimum amount for every debt you have except the smallest one, which you will pay as much as possible.
For example, let’s say you have $5k on credit card balance, $10k on student loans, and $1k on auto loans. With the snowballing method, you’ll pay the minimum monthly payments on your student loan and credit card balance. You can then focus on your auto loan, which is the smallest, and pay for it as fast as you can. This snowball method motivates you to pay your debt since it requires you to take little steps, which will get rid of your debts little by little.
Try to Reduce Your Interest Rates
It can be difficult to pay off your debts if they have high interest. However, you don’t have to settle for a high one since there are multiple things you can do to reduce them. First off, you can renegotiate your loan terms with your creditor. If you have a good payment history and good credit, you can ask them for a lower interest rate.
Another thing you can do is to consider a balance transfer credit card. You can transfer all your balances to a balance transfer credit card with an introductory 0% APR. This way, you have a short window to pay off your balances without worrying about interest.
Avoid Taking On New Debt
Of course, as you’re repaying all your debts, you should avoid taking on another since it can pile on your problems. You should commit to only taking on new debt if it’s necessary. It will also be helpful if you can be as thrifty as possible. Try to cut off unnecessary expenses you have in your everyday life, like going to Starbucks, eating out, etc..
Use Windfalls for Debt
When we get a stimulus check, inheritance money, or a debt payment from a friend, it can be tempting to use them for our enjoyment. It’s unexpected money, so why shouldn’t we enjoy our little freedom, right? Well, it’s certainly a good idea, but instead of spending it on yourself, why don’t you commit the unexpected money you have for debt? Remember, every little bit helps when working towards your debt.
However, if you still want to have fun with your unexpected money like watching NFL teams or eating out, you could at least take half of it towards your debt. You could do this, for example, just going to the games every other Sunday or only eating out every weekend. This way, you will be guilt-free since you’re being productive and having fun. But we still recommend you put every windfall on your debt since it will give you momentum in repaying it, leading to you getting out of your debt problems sooner than expected.
Final Words
Paying off your debts is a huge step towards financial freedom. It’s not easy, and your journey will be long, but at the end of the day, nothing beats putting all your money for yourself and not towards your debts. If you want to get out of your debt problems soon, then you might want to follow the tips we discussed above.
