Let me guess, you are struggling with your debt. You are now feeling guilty to take debt. Now, you need a way out to pay these.
Don’t worry, you can repay debt eventually. Its not that hard.
All you need is an awareness and specific strategy.
Being an ex-banker, I helped lots of customers to reduce their debt.
In this ultimate guide, I will show you step by step process to pay off your debt.
At first, let me share one of my customer’s situation.
Josh is a corporate officer. He and his family were enjoying a pleasant life. He bought a brand-new car for his family and paid for the down payment for a bigger house as well. Everything was going well in life until he realized his finances were not in sync.
He was way over the budget. And the monthly installment for the house and the interest for the loan he took for that are giving him a hard time stretching his pleasant life forward. Now, he is thinking what to do.
This is the very common scenario among all the middle-class families in the USA and other part of the world.
Can you imagine a life where there will be no hassle of managing debt and your money will be invested in the most lucrative assets providing you highest return?
You will control your finances and debt and sleep better at night?
It might sound like a fantasy to a lot of people like Josh. In our personal and professional life, we borrow money for different reasons expecting different results.
But we often forget about the debt consequences- a lump of money in form of a loan. Therefore, we end up burying ourselves in the burden of debt which we don’t seem to be able to pay to lead towards a distressed life.
Yet, the 2020 New Year Financial Resolutions Study by Fidelity reveals that in the New Year, Americans are reasonably confident about keeping their finances in order.
67 percent of respondents said they’re considering making a financial resolution for 2020, up from 61 percent a year earlier, according to the survey.
The aim of “living a debt-free life” is one of the top things inspiring people.
However, the fortunate thing is that there are ways out of this problem that come as a ray of hope for us.
The steps we’ll be discussing below can work as somewhat of a roadmap to manage and repay debt in a smoother and faster manner.
Step 1: Evaluate Your Current Reality; You Can’t Define What You Don’t Measure
It’s the hardest to get people to start a process. But, once it is done, the process gets into a flow and keeps going smoothly.
To see where you are, you actually need to take a hard look at your finances now. Have no edge left. Check all filing cabinets, all online accounts, all detail— to decide just how much debt you have to deal with.
- First, You Must Determine What Kind of Debt You Have
There are different kinds of loans which come with different maturity period, interest rate, and other expenses, for instance, student loans, personal loans, credit card debt, mortgages, auto loans, payday loans, business loans, loans from retirement/insurance plans, and any loans from family and friends. Each type of loan requires distinct management. Now to proceed, see which one you have in your account.
- Personal Loan
A personal loan is an unsecured loan, where the money is borrowed from banks or credit unions and requires monthly fixed payments or installments over a period.
Personal loans are opted by the borrowers to meet any personal purpose such as buying appliances, go for vacations, weddings, etc. To consolidate high-interest debts, people often prefer personal loans as it comes with a low-interest rate and helps to pay it off faster.
- Student Loan
At some point in your life, except in very serious situations, you WILL pay them off. Congress provided amendments to the bankruptcy code in 2005. It ruled that no student loan could be discharged in bankruptcy, federal or private unless the borrower can show that repayment of the loan will cause undue hardship.
According to a recent TIME post, “undue hardship is a condition that is incredibly difficult to demonstrate unless the person has a severe disability”.
That basically lumps student loan debt into other forms of debt that cannot be forgiven with child support and criminal penalties.
The story does not end here. However, there are ways of dismissing the student loan, but it is hard to apply for them.
You can qualify for loan dismissal if your school closes before you can complete your program. This only refers to those who, within 90 days of its closure, attended the school.
You can get the loan dismissed if the loan signature has been forged.
If your loan has been falsely certified (your eligibility for the loan has maybe been falsely certified by the school), you can have it dismissed.
If the school doesn’t make the necessary return of loan funds to the lender, you might also have your loan dismissed.
One last way (the most practical way) to loan forgiveness is to become a public service employee.
Finally, the debts will be forgiven if you are a member of the U.S. armed forces in a hostile fire or imminent danger pay field.
A new study conducted by Junior Achievement and PwC US says, 24% of millennials believe their student loans will be forgiven.
It seems as if 24% of millennials are going to be disappointed. It seems more than likely that you will have to pay back your student loans at this point in time.
- Credit Card Debt
All of you must be aware of credit cards; a mere swipe and you have got your purchase. Credit cards give the liberty to the holder of spending to a certain extent over his or her account balance which makes its usage frequent.
Do not forget to include the balances of every credit card in your name when enumerating your debt.
Even if there are cards that you haven’t used in years, they might have balances too. Do not exclude store cards either.
- Business Loan
Relatively, prevalent loans are the business loans taken for starting a business or financing an existing one. They might include debt financing, equity financing, rollover retirement funds for any of the mentioned purposes or to keep alternative financing options you might be opting for.
- Mortgages
Mortgage loans are considered as ‘necessary debt’, but, that does not mean it should be overlooked. If you have this, you might be used to paying it each month. Consider your primary, secondary residence, and whatever rental assets you own.
- Loans from Retirement/Insurance Plans
Have you ever lent yourself money?
An article published by TIAA CREF states, “Borrowing from retirement plans is common: 29% of those surveyed said they have taken a loan from the savings in their workplace 401(k), 403(b) or defined benefit plan, with nearly half of those (47%) borrowing more than 20% of their savings.”
Kevin Howard, an insurance broker, and publisher of the Insurance Leads Reviews site, when asked about borrowing against a life insurance policy, said, “Borrowing against the cash value of a life policy is more treacherous than most consumers realize. There are numerous hidden fees, interest multipliers, and tax issues that make the option very expensive.”
Howard went on to suggest that this lending option is not recommended, but if appropriate to obtain a financial professional’s advice to recognize the specific cost consequences depending on the policy and position of the borrowers versus alternatives.
There are so many other types that might not be seemingly staggering but can be and none of them should be forgotten or excluded from your consideration in this respect.
- Discover the Amount of Individual Debt
It’s hard to find out the accurate number when it comes to measuring your loan. Hence, the word ‘discover’ has been used as a reference. Leave out a statement even if that’s just a month old. Always look for what you have in your account today.
Compounding causes interest accrual as well. Make sure to use today’s number particularly in case of large loans.
- Discover the Interest Rates (APRs) of Individual Debt
In the debt analysis process, you need this information for later. You know what sort of loan(s) you have and the cumulative amount of each one so far.
You have a bit more to do while the interest rate is variable (also known as dynamic or floating). To predict the future, you basically need to do your best.
Do your best to foresee the future rates with variable rate loans.
This is fairly simple for credit cards. Right now, you might be at a low introductory rate, but decide when the rate will end. Note then what the normal rate of interest would be.
For other kinds of loans, you need a crystal ball to forecast future interest rates. For instance, in fine print, a HELOC may state the maximum possible interest rate.
It’s difficult to guess where adjustable interest rates will go. It is possible to use some educated guesses, but realize that you are never 100 percent sure of what the future holds.
When the Federal Reserve publishes its rates at the beginning of each month, not even your bank can offer exact future figures.
It’s because the Federal Reserve normally borrows from your bank. Before they can decide what, they can call your current interest rate, your bank wants to know how much it will cost them to give you a loan.
- Debt to Income Ratio
This is a widely used statistic that, relative to how much money you make, puts your debt into perspective.
The debt-to-income ratio (DTI) is also calculated in various ways. For example, when you apply for a mortgage, your DTI is determined by the banks as the percentage of your monthly income for monthly loan payments.
In the book Your Money Ratios by CBS MoneyWatch columnist Charles Farrell. Farrell’s idea of simplifying financial planning by applying ratios to personal finance (something that financial professionals do all the time, anyway) is quite likable.
Though not one of Farrell’s ratios, you might like to calculate a debt ratio as the amount of total debt (excluding mortgages) as a percentage of gross annual income.
Example 1: You earn $50,000 a year and have total debt of $25,000. Your Debt Ratio equals to 0.5.
Example 2: You earn $100,000 and have total debt of $250,000. Your Debt Ratio equals to 2.5.
This provides you with the standard for how indebted you are (and what it takes to escape)
So, whatever the ratio of your debt, don’t despair. It just means you’ve got some work to do if yours is way up there.
Step 2: Sort Your Debts into ‘Good Debts’ and ‘Bad Debts’
Generally, two types of debt can be seen: good debt and bad debt. Good debts are those that help you increase your current wealth by being used as an investment, for instance, business loans.
On the other hand, bad debt is a loan that cannot be considered as an investment. Most personal or consumer loans fall under this category. Bad debt includes high interests, high fees, and high penalties. Taking a loan, even as an investment, with a high-interest rate can be viewed as bad debt.
To strategically manage debt and facilitate the repayment, distinguishing between good debt and bad debt is essential.
Decide What Debt You Want to Decrease/Eliminate/Keep the Same
The debt you are currently working on is likely to fall under any of these three categories:
- Loan(s) You Want to Decrease
Your overall level of debt might make you feel uncomfortable. You might want to get rid of all your bad debt.
Sort these loans into a group of their own. Bear in mind, there is a prepayment penalty on certain loans! You may be considering consolidating the debt. To decide whether consolidation makes sense in your particular situation, use this free tool.
- Loan(s) You Want to Eliminate
You might want to get rid of all revolving credit card debt … You might want to get rid of all loans and live debt-free, as many Dave Ramsey followers say.
Whatever your rationale, put in this category all debt you want to be rid of.
- Loan(s) That Require No New Strategy
Loans in this category require no strategic tabulation and management meaning you are thoroughly comfortable having them in your account.
Now, you can carry on.
Step 3: Decide on Suitable Debt Repayment Strategy
(Source: Art of Thinking SMART)
It’s no simple task to pay off debt, but it will help bring financial independence. There are two distinct debt pay-off methods: the method of debt avalanche and the method of debt snowball. Although both are effective methods for keeping debt out of your life, it might be easier for you to stick with one strategy and have a greater impact on your debt reduction. Here’s how to figure out which form of debt reduction is right for you.
This is the more prevalent way to pay off debt. Suze Orman is a major supporter of this proposal. You pay off the debt with the highest interest rate then you pay the lowest interest rate.
Paying off highest interest rate first, you can save money on future interest payment. Mathematically, this is the ‘right approach.’ The snowball approach, though, still has its merits.
The aforementioned financial guru, Dave Ramsey, also uses this phrase. You pay off the smallest debt first using this form. The case for the snowball strategy is more emotion-based, instead of relying on interest rates.
The theory is that you will be motivated to keep ‘snowballing’ your way out of debt while you remove small debts.
I personally believe you pay off your highest interest debt first.
The avalanche method is right, mathematically speaking, for paying off debt.
But the management of money is also dominated by emotion. ‘Left brains’ prefer the approach to avalanches,’ right brains’ prefer the approach of snowball.
Tools that’ll help you get out of debt
Motivation is half the fight, so why not take them if there are instruments available to help you get out of debt yourself?
It’s much easier for those trying to get out of debt in 2021 than the debt battlers of just a few years ago. Long gone is the credit crunch. If you have completely scorched your credit score, you should be able to crawl your way out of the hole using the credit system.
Step 4: Construct S.M.A.R.T. Goals
The acronym ‘S.M.A.R.T.’ in the term ‘Smart Goals’ refers to Specific, Measurable, Attainable, Relevant, and Time-Bound.
(Source: DebtGuru.com)
On step four, you begin to see how you’ll deal with your debt. It’s important for everyone to have goals in sight.
Specific:
Goals are always bound to be specific. A SMART goal answers the following questions: what you want to accomplish, why do you want to do that and what steps are needed to achieve the goal.
Goals should always clearly define your intentions. Like, if I want to get rid of my credit card debt, nothing won’t happen until I set specific goals and take action.
I can plan of repaying my $5000 debt by paying $250 each month for the next 20 months. It will be an example of specific goals. Specific goals also include both your current debt goals and other goals to prevent future unwanted debt.
Measurable
If the goals are quantifiable, you get to measure your progress. It’ll be easier for you to keep track if you break-down your goals into measurable pieces. You can use a pen and paper, a spreadsheet, or an app to keep track. It will help you visualize your progress towards your goal and let you know that your plan is working. If you have a $10,000 loan, every $1000 you pay off is 10% progress towards your goal of debt freedom.
Attainable
Yes, you should stretch yourself but not over-stretch. Make sure it’s realistic for you to accomplish the goal. With the said example of the $10,000 loan, the plan of paying $1,000 per month isn’t feasible if your monthly saving is $800. Before setting your goal, check out if it’s achievable for you.
Relevant
To know the reason why you want to accomplish the goal is necessary. Will it make your life better? For example, it might be possible for me to save $50,000 for a trip this year, but is it realistic in a situation like this when people are still fighting with the virus? Not so much.
You should take steps considering your ultimate goal. Set such objectives that you’ll be able to manage and will help you achieve your goal one step at a time. According to DebtGuru.com, if you want to have all four of your balance-carrying credit card’s balance to be zero, it might be a realistic objective to focus on paying off one of the cards at a time. Otherwise, the attempt to tackle the debt on all of them at the same time can be disastrous.
Time-bound
It’s the time when you ask yourself when you will achieve your goal. Set a timeframe or deadline like, by 2022, I want to be debt-free. That’s how you’ll have a starting date and a deadline to achieve your goal. After setting a deadline, it’s important to stick to it. Of course, you can always adjust your timeline. But the more routine steps you take, the more likely you are to achieve your goal.
This article will let you know about the five-best goal-tracking services to help keep you focused on your goals.
Step 5: Credit counseling and debt management
By taking the help of credit counseling, you can make your way to financial freedom easy. Though it’s not impossible for you to get out of debt on your own, sometimes you can take help from credit counseling agencies for that.
(Source: Adamson & Associates Inc.)
Credit counseling agencies can help you by offering debt management plans (DMPs) as your way out of unsecured loans (loans that don’t have any collateral).
What is a Debt Management Plan?
‘Debt management plan’ is a way of paying off your unsecured loans like credit card debt by paying a monthly amount to your credit counselor, who will distribute it among your creditors.
When you take help from a credit counseling agency, you meet a counselor who helps you down the road of your debt repayment.
If you want to delete all of your debts under one plan, a DMP usually lasts from three to five years.
Why opt for a DMP?
A debt management plan can save you from defaulting or being bankrupt. And by negotiating with your creditors, your credit counselor can also lower your interest rates and payment amounts.
Be careful, don’t rush. Go through this article to know how the process works and the benefits & drawbacks of DMPs.
Which agency to select?
Many credit counseling agencies that provide education and assistance.
If you are looking for both a non-profitable and reputable agency, you should go for The National Foundation for Credit Counseling. With the help of its credit counselors, you can get to meet somebody in your area. You will be charged a fee for their time or monthly. But the interest you save would be more than covering your cost.
You can also go for Accredited Debt Relief, which is another reputable credit counseling agency. This agency partners with well-known Debt Relief companies with whom you can negotiate your credit card debt.
To be surer about DMPs, give this article (10 things to know about debt management companies) a read.
Finally,
Know what debt solutions to avoid
Some companies offer such services that will only make your situation worse. Avoid any service that promises to reduce the total amount of your debt.
Being in debt can make people listen to the wrong people or make wrong decisions.
Debt consolidation is such a way that takes all of your debts and rolls them into a single debt. Though it might seem pleasant at first, you’ll have to face terrible consequences in the long run.
Step 6: Getting to Work: Time to Act on the Strategies
By this point, you have already tabulated all your debt. You can distinguish between good debt and bad debt and are very aware of what you want to have in your account and what not. You have decided on particular strategies as well. Now it’s time to put all the pieces together and get to work.
This final step solely requires your efforts and dedication. So, by sincerely following this step, you will be likely to end up living your desired life where you have a full grip over your financial liabilities and be free of them.
(Source: MilSpouse Money Mission™)
Tips to help get out of debt
- Stop piling up more debt
To be out of your current debt, the first and foremost thing you must steer clear of adding any more debt to your account.
Do not buy things that are not necessary, stop using credit cards for things you can’t afford to buy. If you try, you can live as frugally as possible.
You need to avoid adding to the pile to build a debt reduction plan that works. When you’re in debt payoff mode, instead of credit, consider converting to cash or debit. And ensure that, unless you really have to, you refrain from taking out new loans.
Instead of always using credit as a crutch, learn to live within your means, and you’ll be a lot better off.
- Make a budget and debt pay-off plan and stick to them
When life seems scattered, planning comes to the rescue. The same applies to debt repayment as well.
Make a budget, track cash flows, create a debt pay-off plan, and follow them.
You might also find that you are spending a lot more than you thought in categories you have some control over, once you start monitoring your expense and writing down your bills and liabilities each month.
- Make lucrative use of your current investment
For people it’s normal to forget this phase. It is the best way to produce more profits, though.
Examine all the savings you have.
Do they fit the S&P 500 or surpass it?
This is a great benchmark. Mind the related costs, too. An investor bulletin has been published by the U.S. Securities and Exchange Commission detailing precisely how fees and expenditures impact the portfolio over time.
If you’re in an expensive fund, it helps imagine how much money you are spending. Not only are you losing money on payments, but you also can’t spend the money, too.
Ensure that all your existing investments are suitable. Make sure they make money and charge charges that correspond with the success of the fund. You don’t want to waste any money you can use to pay down debt!
- Look for more earning sources
It might be time to pump up your earnings in every way you can if you’re tight on funds every month and can’t seem to raise enough money to pay extra for your bills.
This may mean taking up extra hours or doing shifts, but it may also mean coaching or taking up a side gig or part-time job on the side.
Make sure all the extra cash you carry home is used to pay off your debts if you find a way to earn more money. You’re not going to be any better off if you wind up wasting it.
- Follow the idea of frugal living and smart shopping (By Dave Ramsey)
- Track your expense and identify the area you can probably cut back
When I ask someone how I can improve my financial situation, the first thing they say is, figure out ways to cut your expense.
It is easier to say than do it in real life. Sometimes we don’t even realize where we’re overspending.
So, it can be hard to find out those sources and eliminate them. However, there are ways to reduce your spending so that you can save more money to achieve your goals and spend less on purchases that don’t improve your life or long-term financial situation.
One thing you can do is, write down everything you buy in a notebook, on a spreadsheet, or in an app. It’ll help you give more attention to each purchase and spend consciously instead of recklessly.
- Start couponing
As I mentioned before, when we try to cut our spending, we often focus on eliminating purchases.
But we can’t stop purchasing all the products that we need in our day to day life.
To me, couponing is a smart way to save money. So, you can get benefitted by using coupons and looking for discount codes.
Sites such as Klip2Save make this process easy for you.
Otherwise, you can get coupons through your email if you sign up for online coupon websites.
Then the websites will provide you with all the things you need. So, all you’ll have to do is, hit the print button!
In KrazyCouponLady, you can choose the coupons you need.
- Try consignment shopping
As we’re trying to find ways to save your money, consignment shopping can be a great way. Kids grow so fast and need new clothes very often.
So, you can look for consignment stores near you where they sell worn clothes of good condition.
If you prefer online shopping, thredUP and Swap.com can be great sources of adult and children’s clothing at a lower cost.
- Cut the cable
Most people now watch TV shows online. Some people are still paying their cable bills and maybe you are one of them.
But paying the bills for your cable is a waste to me. Because you are paying for something every month, you don’t even use it now that much.
So, make your family watch their favorite shows online so that you can cut the cable for good and save that money.
- Stop going out to eat
Though cooking is tedious for some people, cooking at home can bring a noticeable change in your financial condition.
According to The Simple Dollar, on average, an American eats out almost 4 to 5 times a week.
As we all like to spend more money on ordering pizza and burgers, limiting this can help you a lot.
Okay, I’m not telling you to stop it from today, but I can suggest you something. Like, if you are used to go out to eat 5 times a week, try to go once a week from now.
Thus, you’ll be able to stop yourself from eating out and cook by yourself.
- Break up with your barista
Yes, you read that right! If you can’t address where all your money is going, maybe you are forgetting about the coffee shop.
All of us have a favorite coffee shop or a go-to place. We don’t even understand how much money we spend going there.
Make your coffee at home and you’ll see how easily you can save money.
- Avoid expensive hobbies
Is it really feasible for you to buy a $270 lipstick when you’re trying your best to reduce your expenses?
Or do you have $200 to spend on golf every month?
So, put a freeze on these expensive hobbies for now.
- Ditch the gym membership
I know there are a lot of people like me who become a gym member out of excitement but loose interest within a month.
So, be sure before becoming a member of a gym because you can always work out at your house.
Nevertheless, you can go for a walk or run outside, and it’s free!
- Find free entertainment
Yes, you do spend a lot of money to entertain yourself. Try to find out sources of entertainment which are free.
Stop going to concerts, movies, or any other thing you like to do for fun that costs you money.
Instead, you can take your children to the nearest park or you can go for a walk or go hiking.
- Sell the car
If you have a car now, sell the car. Start walking to work if it’s near your house. Or take the public transport!
If you are thinking about buying a new car, forget about that now.
Because you’ll have to spend $554-$800 monthly to buy a car. And now it’s not the time for you to spend $500 per month on a new car.
- Cut up your credit cards
If you really want to be a debt-free person within the next few years, forget about your credit cards.
You can never get out of debt if you don’t cut this massive source of debt out of your life.
- Use the envelope system
To make sure that you’re spending according to your budget, you can use an envelope system.
It is a system in which you put an amount of cash in an envelope and label it with the name of the category of product you want to buy.
Thus, you’ll be allocating enough money for each category and it will prevent you from overspending.
For example, you can make an envelope for groceries, one for rents, one for children’s activities, etc.
Once the envelope is empty, you can’t spend on that category anymore.
Mvelopes is such an app that allows you to use a virtual envelope system. Before having a physical envelope to limit your spending, you can try it to see its effectiveness.
- Stop investing
Okay, don’t be mad. Helping you enter a debt-free life is my only concern now. I want you to stop investing and using all our money to get out of debt as soon as possible.
When you finally become debt-free and have an emergency fund for your six-month-expenses, resume your investments.
- Seek for a raise
Had you never had the thought of asking for a rise? I suggest you give it a go.
There’s a saying by Michael Jordan that “You miss 100% of the shots you don’t take.” You’ve got nothing to lose. So, give it a try.
- Learn to refuse
It’s important to know when to say ‘no’. Because in your journey through financial freedom you’ll have to say to other people and yourself too.
You’ll have to stop helping your broke friends and stop yourself from purchasing anything unnecessary.
- Add no-spend days to your calendar
The Motley Fool gave me the idea of a no-spend day. And I think this such an innovative way to keep yourself away from spending money.
You can get the idea by the name. On a no-spend day, either you buy nothing or buy only necessary stuff, such as toiletries.
If you have a no-spend day each week, you can restrain yourself from spending four days a month.
Isn’t that great!
- Pay more than the minimum payment
In case of credit cards or overdrafts, always try to pay more than the minimum amount. If you don’t it’ll take you more time to pay off your debt. If you can’t afford much, payment of an extra $50 per month can help you a lot.
Before you start paying extra, make sure you won’t be charged a prepayment penalty for this by your lenders.
- Skip shopping when you’re hungry
According to researches, when you go shopping with an empty stomach, you end up buying junk foods.
So, don’t go shopping when you are hungry. This way, it’ll be easier for you not to buy non-food items and waste money.
- Use a balance transfer credit card
An excellent choice is to get a balance transfer credit card if you are on a low income and you are trying to get out of debt.
Here’s what happens, you transfer the debt from one credit card to a second new credit card and pay off the remaining balance easily in this way.
Balance transfer credit cards have a significant advantage. As an incentive for the bank to get your client, they almost always come with a special kind of promotion.
And you don’t pay any interest rate at all during this time and it’s an opportunity for you to save money on all the interest you’d otherwise pay on the lump sum you owe.
- Ask creditors to lower the interest rate
Again, you’ve got nothing to lose if you just ask your creditors to reduce your interest rate. Many of us are paying higher interest rates on cards than we can actually afford. Negotiating with your creditors to lower the interest rate can be a great way to pay off your credit card debt faster.
- Settle for less than you owe as debt
Here, you can seek help from debt settlement companies so that you can negotiate with your creditors.
These companies negotiate to reduce your debt payment in exchange for a fee.
If you really got the chance to pay less, why waste it!
- Debt consolidation loans
Debt consolidation can be a helpful way for you if you have a number of high-interest debts such as credit card bills and roll those up in a single debt. This is a good way because you can get a lower interest rate and reduce your total debt.
If you have debts with different interest rates and due dates, debt consolidation can make your way to financial freedom easier.
- Cancel memberships
Analyze which memberships and subscriptions you don’t need and get rid of those. Like, if you have all these streaming services- Netflix, Amazon Prime, and Disney+, you don’t need all of them at the same time.
So, keep one and cancel the rest!
- Sell unused items on Craigslist
You obviously have a lot of stuff in your house that is in such good shape that you could earn by selling those. Try eBay, Craigslist, or Facebook Marketplace for selling your unused items. With this money, you’ll be able to make extra payments for your debts.
- Pay Off Your Most Expensive Debts First
Identify the most expensive debt you have and try to pay extra so that you can pay it off first. Because this loan is the one that needs to be paid more attention than the other ones. If you can pay it off early, your burden will be lessened.
- Refinance Your Mortgage
Before refinancing your mortgage, be sure that it’ll save you money and help you pay off your debt faster. If your interest rate gets reduced by at least ½ of a percentage, consider refinancing as a good idea. Because it’ll reduce your monthly payment.
But seek advice from anyone but your lender, who can help you know both the good and bad effects of refinancing a mortgage.
Have a conversation with a non-profit Credit Counsellor and you may get to know about better options than refinancing your mortgage that you didn’t know before.
They might come up with the best plan and help you understand all the other options and achieve your financial goals.
Conclusion:
In case you are still skeptical about how you’re going to outset your goal and feel discouraged and afraid to do so, stories of people who fought their debt with immense dedication might help you get you on your feet.
NerdWallet conducted a series where they interviewed people who overcame their debt. You can access them here.
That concludes our discussion on the strategies to get out of debt right there. Financials that include tons of liabilities are quite a hard nut to crack.
Therefore, people often feel reluctant to strategize on them thinking it might not bring any fruitful outcome.
Some feel afraid to face the challenges as well. But, if you have gone through the steps already and is contemplating to bring them into action, trust me, you are on the right path and your efforts are bound to help you get a debt and hassle-free life.
So, get on your feet and do the most you can for leading a free and peaceful life, without being financially relied on anyone.
And if you feel you have hit a wall and can’t seem to figure out anything, do not lose hope and keep working on it.
Because every step requires a reasonable amount of time to succeed. Over time, your efforts will pay off too.
