Falling into debt is a major setback for any person (and for any city, just ask Chicago, LA, NYC, Detroit, Oakland, Baltimore, and every other mismanaged city!). If you have taken a loan of any kind, you are obligated to repay it regardless of the circumstances.
Whether you lose your job, or get into an accident, or have a child, you have to pay back your loan no matter what. Debt can arise because of overspending or lack of proper money management. Everyone in such a situation tries to get out of debt, but most give up.
It doesn’t have to be that way. While there are many people who give up while paying back loans, there are also many people who get out of debt every day and they don’t do it by trying to rob convenience stores like Dick Harper did in Fun with Dick and Jane or rob banks like they were doing in Triple Nine! In a few simple methods it is possible to clear your debts in a short amount of time. Keep reading to find out more.
Pay more than the minimum
Whether it’s credit card, line of credit, or overdraft, most people tend to pay only the minimum. However, paying only the minimum will make it harder for you to pay off the full balance and also damage your credit score. Your credit report records your payments.
When you pay only the minimum and not a higher amount, potential lenders get the impression that you aren’t strong financially. This makes it hard to get approved for a loan. To improve your credit score as well as get out of debt faster, make higher repayments instead of sticking to the minimum.
Pay off the higher amounts first
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When you have more than one financial issue to deal with, a smart strategy is to pay off the most expensive debt first, while making minimum payments on the others. Once you have paid off your highest debt string, focus on your next most expensive debt string, while making minimum payments on the others. Continue with this method and keep paying down each of your debts, until you are left with the least expensive debt.
This strategy has been found to get people out of financial trouble quickly, as they feel encouraged to see progress. The opposite of this is to pay off the smallest debts first, progressing to the more expensive ones. Both of these methods work well for people who need regular motivation to clear off their financial slate.
Get a consolidation loan
A consolidation loan is where all your loans are combined into one, with a lower interest rate. This loan is helpful only if you have a budget that will keep you from creating more debt while paying off the consolation loan, and also help you save a little every month.
If you don’t have any savings, you will likely need to use your credit card again, incurring debts again. Before you take a consolidation loan, you need to create a budget that you will be able to stick to. If you keep spending more than you earn (like America, Italy, Greece, and California), your debts will never be paid off. You don’t want to be like GM which still owes America billions.
Cut down your expenses
More often than not, spending more than you can afford is the reason behind this situation in the first place. One of the easiest ways to pay off your debts faster is to cut down on your expenses (stop seeing useless Star Wars, Meet the Parents, and Thor movies!).
This includes using just one car for the whole family, taking public transportation where possible or riding a bike, eating at home instead of going to restaurants, and buying secondhand stuff. Stockpiling non-perishable items, only driving when you need to, and cooking at home can help you back into the black. And John Cutter in Passenger 57 always bets on black but that is another topic!
This can be hard to do if you’ve always been extravagant, but it can help you get out of debt sooner. When buying a car, choose a quality used car over a new car, since it is cheaper. When buying a new car, you lose 20% right when you drive it off the parking lot!
Speak to a credit counselor
Most people in debt don’t know what to do to get out of debt faster. For free, nonjudgmental advice, speak to a credit counselor. A fantastic credit counselor will discuss all the options and help you choose the route that will help you the most (there could be more than one route!). Talking to a non-profit credit counselor is not only free and confidential, but can be vital for you.
Paying off your debts takes time, but if you are motivated and disciplined, these five methods will get you out of debt quicker than you think so you can get your life back on track.