About 80 percent of Americans are in debt. Whether it’s student loans, mortgages, or car loans, they are preventing many people from considering investment options or savings. Some choose to ignore the situation since the reality is too much to bear.
At some point, however, they are forced to face the grim reality and make decisions about living a debt-free life; so the journey begins.
This article provides you with the tips you need to navigate this long journey. Take a look.
- Evaluate Your Debts
Approximately $945.9 billion; That is the total credit card debt held by Americans, according to data from the Federal Reserve in August 2016. This means the average American has around $4,000 in credit card debt.
With these statistics, it’s important for you to analyze your debt position before you take any steps to reduce it. You can do this by getting your financial documents, including your credit report and credit scores, from at least two bureaus to get a clear picture of where you stand.
The type and amount of debt you owe will influence how you move forward in terms of repayment.
- Use the Debt Snowball Method
After evaluating your debts, you’ll have a better understanding of the smallest and largest loans. The snowball method seeks to start by paying off the smallest loans first. Channel all funds toward paying these debts and after clearing the first one, move on to the second.
After some time, you’ll have cleared all the smaller loans, allowing you to focus on bigger debts. This method allows to you track your progress while registering significant wins in terms of your just right loans. With this effect on your psychology, you’ll have more willpower to tackle the bigger loans. Before you know it, you’ll be debt-free.
- Add More to the Minimum Payment
If, for example, you have a debt of $15,609 at 15% APR and you make monthly payments of $625, then you will take about 13.5 years to clear the loan. This is a long time.
Whether you have personal loans, student loans, or credit loans, a proven method of paying off the debts as fast as possible is by adding more to your monthly payments. By doing this, you’ll pay off the debt faster while saving on the interest you’d have otherwise paid during the loan period.
While this is a great strategy to clear your debts faster, it’s vital for you to check with your lender regarding any early payment penalties.
- Get a Side Job
Paying more than the minimum every month will help you quicken the repayment process but increasing your income will intensify your strategy even more. Maybe you are good at writing, web designing, graphic designing or babysitting. You can leverage these skills to start a side hustle.
After identifying which skills, you are good at, you can sign up for freelance platforms like Upwork or PeoplePerHour where you can find a pool of clients offering loads of work. With the extra money you make, you can fast-track your loan repayment.
- Consider Frugal Living
This is probably the best advice you’ll come across in your quest to pay off your debt. Frugal living involves cutting down unnecessary expenses from your household budget. Do this by going through your monthly budget and identifying what to cut down on.
The point here is to live on the bare minimum while saving the rest for loan repayment. Do shopping in bulk and consolidate your trips to the grocery store to save on gas. Even better, ride or walk to the store if you live nearby. Cut the cable television and so on.
For encouragement, frugal living is temporary. You can get back to your normal life once you pay off your debts.
- Renegotiate the Interest Rates
Sometimes, you might have taken all the possible steps to put more money into your pocket to clear your debts, but for some reason, you don’t seem to make any progress. This is the time you need to contact your lender for a lengthy discussion about the possibility of lowering your interest rates.
It might sound like breaking through a concrete wall, but it’s actually possible. In fact, many borrowers consider taking this route. If you have a fantastic credit history, then there’s a good chance the lender will bring down the rates.
- Transfer Your Balance
If the renegotiations don’t go as planned, you may want to look into a balance transfer. Many lenders offer balance transfer options to borrowers which can help you land 0% APR for a period of time. The only catch is that you’ll sometimes have to pay a small fee to facilitate the transfer.
For, example, if you have a Chase Slate card, you’ll benefit from the current deal they have, offering zero fees on transfers within the first 60 days. In addition, you’ll also benefit from the 0% APR on purchases and transfers in the first 15 months.
- Unexpected Income
During the loan period, you may come across a huge sum of money you didn’t expect. It could be from a bonus at work, a raise, an inheritance, or a tax refund. Whatever the source of the income, you can channel those funds toward paying off your loan.
It doesn’t matter what time of the year you come across this money. Use it to slice off a piece of the debt. This will go a long way in reducing the repayment period, thus saving you a lot of money in interest.
- Quit Expensive Habits
Do you always fall short of paying your debts every month? If your answer is yes, then you need to re-evaluate your spending habits. They’re choking your wallet.
Take some time off to take a look at how you spend your money on a daily basis. This way, you can identify what the biggest drain of your finances is. For example, one expensive habit could be taking alcohol. This doesn’t do you any good, it only obscures your vision of a fast loan repayment.
Other habits could be eating lunch at a restaurant during work days. You can sacrifice these things for the bigger picture.
- Sell Off Some Unnecessary Stuff
Hold an old-fashioned garage sale. This is the easiest and fastest way to offload your unwanted items. You can also list your items on eBay or other sites that accept such types of sales.
This is a fast way to get quick cash. Analyze your belongings before you put things up for sale, then sort them out and identify what you can sell. Chances are, you’ll find a number of items you can sell.
Besides, why hold on to stuff you don’t use when you can make some cash to fund your debt repayment?
Over to You Now
Debts can be addictive and it’s vital for you to detach yourself from them as soon as possible. The burden of monthly payments can be overwhelming. Regardless of the debt, you’re in—student loans, personal loans, car loans, or otherwise— you can always find your way out of the debts.
Keep in mind, however, that is not an overnight journey. With a solid plan and the tips listed in this article, you can clear your debts faster, guaranteeing a shorter journey to a debt-free life.