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Getting into debt is easy. Getting out of it is an entirely different story. If you find yourself in a position where you are neck-deep in debt, you know how hard it is to get out of it. This is mainly due to the way debts are designed to get you.
Obtaining debt is easy for anyone these days. All you have to do is fill a few applications, sign a few documents, and be ready to go. The financial institutions providing you the debt will also lure you by using fancy terms and telling you it is easy to repay the loan.
Let us show you; it is not. Nowadays, debt is all around us, and it is hard to get out of it even if you try. From credit cards to student loans and mortgages, we are surrounded by debts. Paying off these debts can have serious implications on your personal finances.
If you don’t know how to get out of debt, then don’t worry, you can achieve it by using a few tips. While this list is not exhaustive, it can surely help you manage your debt better.
Don’t Get More Debt
If you want to become debt-free, it is crucial that you don’t pile up on more debt. Some people take more debt because they don’t have any other finance source to pay existing debts. And while paying debt with debt may sound attractive, it is definitely not. By creating more debt, you are going to end up in a worse situation than before.
The more debt you create, the more difficult paying off existing debts becomes. This tip should top all the tips you need to follow to get rid of debt.
Ways To Get Out Of Debt: Pay More Than Minimum
When paying off your debts, always ensure that you are paying off more than the minimum required amount of payment. Whether this is the payments on your credit cards, student loans, or home loans, always pay off more than the minimum amount if possible.
While this may burden you for the time of payment, it will help you in the future. You are paying off more than minimum will guarantee that the loans are paid off as soon as possible and that you don’t have to make extra interest payments.
Pay The Smallest Debts Off First
If you want to achieve better results with getting out of debt, you should make a list of all your debts. From the list, choose the smallest debt and dedicate all your resources to paying off that debt first. This doesn’t mean you should forget about the other debts, though. You should still make payments to other debts, but these payments should be the minimum required amount. Once you are done paying off the smallest debt, target the next smallest debt and so on. This is also known as the debt snowball method.
Pay The Most Expensive Debts Off First
Alternatively, you can also pay off the most expensive debts off first. While it may take some time to pay off the expensive debts off first, if the debts are fairly large, it will be worth it in the end. This also works like the step above. Make a list of all your debts and sort them by the interest rates they charge you. Start by paying the most expensive debts and then move on to the next most expensive debt next. By paying off your most expensive debts, you will save some extra money, which you can use to pay off more debts.
Decrease Your Expenses
One of the major reasons people pile up more debt is due to their bad spending habits. If you can simply control your spending, you can stop relying on debts to finance your expensive lifestyle and put more resources towards paying off existing debts. Decreasing your expenses can be difficult at first, but with the help of a personal budget, you can easily identify your major expenses and work towards decreasing them.
Get Rid of Your Luxury Expenses
Luxury expenses are expenses that you want but do not need. It is good to look at your expenses and identify any expenses that you can live without. Perhaps these luxury expenses were the reason you got into debt in the first place. If you have formed these expenses into a habit, it can be even tougher to leave them. However, you can look into replacing them with similar but inexpensive habits. Any savings you make after getting rid of your luxury expenses can help you in paying off your debts.
Increase Your Income
Another way you can get rid of your debts easily is to increase your income. This may mean working two jobs or getting a part-time job to generate more income. However, in the end, it will be worth getting rid of your debts. For example, you can generate some cash on the side by babysitting or mowing loans for some extra income. You can also increase your income sitting at home by becoming a freelancer.
Sell Stuff You Don’t Need
You probably have stuff in your house that you haven’t used for a long time. If these kinds of stuff are of no use to you, you can simply sell them to generate money. It might be tough for you to get rid of things if you have an emotional attachment to them. However, if you don’t need them, it is better to make a few bucks off them while they are still in a working condition. You can make a system to check if you have used the stuff in the past few months and dispose of ones that you haven’t use for a while.
Ways To Get Out Of Debt: Get Rid Of Your Credit Cards
When it comes to piling up on debts, credit cards are the major culprits. You may not realize how much you spend using credit cards until your credit card bills come through. Credit cards make you forget about your personal budgets when you are on a spending spree. By getting rid of your credit cards, you will save some money and get rid of the debt.
Use Physical Cash
Adding to the point of getting rid of credit cards, you should consider using physical cash when making payments. When using physical cash, you understand the true impact of your spending. Therefore, it may help you reconsider buying things you don’t need. This can be a great way to cut your expenses and save some money to pay off your debts.
Ask Your Creditor For Lower Interest Rates
If getting rid of your credit cards isn’t an option for you, you can consider asking your creditor for lower interest rates. However, they might require you to have a good credit score or a good history with them to lower the interest rates. If you have defaulted on some payments or haven’t paid them on time before, this may not work.
Investing can take up your cash resources. If you want to become debt-free, all your resources should be dedicated to paying off your debts. This also means taking your resources out of any investments that you might have made—or reconsidering any potential investment opportunities in the future. Finances take a long time to materialize, and, therefore, it is better to use your resources to pay off your debts now and invest later once you’re free from debt.
Ways To Get Out Of Debt: Get Help From Experts
If you don’t know what you are doing with your debts, you should consider getting help from experts. There are some high quality and fairly cheap services you can avail online to help you with your debts. Websites such as curadebt will give you a free savings estimate and a free quotation. Other websites, such as creditsaint, will give you free credit consultation. This can help ensure your strategies to get out of debt are suited to your needs and are not generic.
Get Help From Friends And Family
If you are short on cash for your debt payments, you can consider asking your friends and family for loans. While these loans are technically also a type of debt, they do not come with any interest payments, and, therefore, you can use them to pay off existing debts. Once you have repaid all your interest yielding debts, you can finally repay your friends and family.
Set Aside Emergency Funds
You may think that we are contradicting our point about dedicating all your resources towards debt payments when we tell you to set aside emergency funds. However, emergency funds can help you in the future once your debts are paid off. These funds can also help you tackle unpredictable situations such as unemployment, accidents, or medical expenses. If you have emergency funds set up for yourself, you don’t need debts for emergencies in the future.
Debts can be easy to obtain but difficult to pay off. You must ensure you don’t get more debt while paying more than the minimum required payment and paying off the smallest or most expensive debts first.You should also make budgets to decrease your expenses and increase your incomes. You can also sell stuff you don’t need. It may also be a good idea to get rid of your credit cards and use physical cash instead of or ask for lower interest rates. Ultimately, you can also get help from experts or friends and family.