7 Ways To Pay Off Your Debt Faster
Whether it’s unemployment, medical emergencies, or just extravagant spending that pushes you into debt, at some point, you’ll have to make arrangements to clear off your debts. Changing your financial situation is a process that may take time, but it’ll also require your self-will, commitment, discipline, and sometimes a complete lifestyle overhaul.
There are several ways you can put your finances on track again, even with minimal income. If you are struggling with multiple debts, then debt consolidation may be the best solution for you. Debt consolidation is a process where you combine all of your debt into one loan.
However, in any debt consolidation explanation, some people may argue that debt consolidation can worsen your financial situation. Considering that you have lumped all your debts into one, it’s easy to be tempted to borrow from your cleared loan facilities. But as long as you strictly adhere to your debt repayment schedule, consolidating your debts is an option worth considering.
Although you may experience difficulties when beginning your repayment plan, it’s important to keep in mind that the process will eventually become much simpler. The first step is always the most difficult. Here are some ways to help you pay off your debts faster.
- Do Not borrow More Money
One of the first adjustments you should do is become accustomed to making ends meet with cash only. By avoiding new debt through borrowing, you can keep your debt repayment strategy from being thrown off. Don’t use credit cards or loans to buy things. Since you are just starting off, you want to do things properly.
- Track Your Expenses
Once you understand your spending, it’s easy to know where to cut costs and how much you can set aside to repay the debts. Use free money management software, bank spending track apps, budget worksheets, or your notebook to track your expenses. Do the tracking for at least two months to have a clearer picture of your spending.
- Have A Budget
Once you have determined your spending patterns, it’s time to create a budget for your money. Put the budget in writing and let it guide you in cutting unnecessary costs, and set aside a regular amount to pay off the debts.
- Choose A Debt Payment Plan (Debt Snowball Method)
The next step would be choosing the right debt repayment plan. The debt snowball method is highly recommended as an effective way to reduce your debts faster. The debt snowball approach suggests that you pay the exact cash amount to all your debts except one. The exceptional debt gets a much higher amount of repayment than the rest. For example, if you allocate USD$500 to repay three debts, two accounts will get USD$100 each, and the third one will get USD$300. When you’ve paid off one loan in full, you should put that money toward paying off another.
The decision of which debt to prioritize is entirely up to you. One way to reduce interest costs is to pay off the debt with the highest interest rate first.
- Debt Consolidation
Debt consolidation is a type of financial management strategy that helps people pay off their debts by taking out one loan to repay all of their other loans. It’s a process where you combine all your debt into one loan. This loan will be at a lower interest rate and allow you to pay off your debts quickly.
You can achieve debt consolidation by taking out a personal or home equity loan. It may be a short-term solution and may even put you at risk of losing your home, but if you are on the verge of bankruptcy or legal repercussions, it can buy you some time to reorganize your finances.
- Debt Avalanche
The debt avalanche has a similar approach to the debt snowball. The only difference is that the avalanche method will require you to list your debts in order of the debts with the highest interest to the lowest interest rates and start repaying the ones with the highest interest. It’s easy to save on the cumulative interest paid and then use the same interest saved to settle any other debts.
- Renegotiate Your Credit Card Debt
Many bank clients must learn to talk to their banks and negotiate a debt settlement, even over the phone. To avoid making excessive monthly payments, you should discuss your predicament with your bank and see if you can renegotiate the payment terms. If you have a good payment history, they may even waive some of the fees on the recurring charges and even apply a better interest rate on your debt.
You can explore several other options to reduce your debts, although they may not be as fast as the ones listed above. Find a way that best suits you without straining your finances so much.
If you have difficulty sticking to your repayment strategy, you can always talk to credit counselling agencies to help you stick to your plan. They’ll assist you in working out a debt management plan with the businesses you owe money from. Lastly, they can arrange for lower payment terms and secure waivers on your behalf.