Cash 1 Blog
Tips To Pay Off Debt
Often we don't realize that how an unnecessary expenditure can get us into debt. To get out of it is a difficult task. Often it takes only a few months to create a large debt and years to pay it off. It doesn’t matter if it’s your credit cards, mortgage loans, Nevada payday loans or student loans; it always gets worse when you are unable to pay it off. Paying off debt is not an easy task; often people spend their whole lives just paying it off.
Here, I’ve listed some smart strategies that can help you pay off your debt as fast as possible.
Say No to More Debt
When you intend to pay off your debt, the first thing you should do is prevent yourself from creating more debt otherwise your efforts are of no use. If you continue adding more debt while paying it off, then your progress will be lost.
Budget Your Expenses
Create a budget that includes your household, insurance, utility bills and personal expenses only. Avoid any extra spending on shopping, luxuries or dining out. Once you create a budget, stick to that, this way you can save a lot of money from getting wasted on the unnecessary stuff.
Prioritize Your Most Expensive Debt
When it comes to paying off your debt, start with the most expensive one. By paying off the debt with the highest interest rate, you will be able to increase your credit card payment simultaneously, making payments on the other credit cards too.
Pay More than the Minimum
In order to make a noticeable reduction in your debt, you should try to pay off more than the minimum balance on your credit cards. If your minimum paying balance is $100 then you should try to pay off double the amount. That's $200. The key is to pay as much as you can.
Go for Zero Interest Balance Transfer
If you have a high interest rate debt which you think you can pay off within a few months then it’s better to switch to a card that provides zero interest balance transfer. This will help you save big. You can also ask your creditor to lower your interest rate. If you have a good payment history, then you can negotiate for those lower rates.
Allocate Bonuses towards Debt
If you receive any job bonus, then allocate it towards your debt paying plan. It’s hard to avoid the temptation of spending it on a few luxuries, but when you intend to pay off your debt or your fast title loans, your money management and financial planning comes first.
Increase Your Income
In order to get rid of the debt, you may need more money than your regular monthly income. You should look for easy ways to make more money. If you have one job, go for a part time job too, or if you can't do more than a single job then try to reduce your spending. You can save on your expenditures by reducing your food budget, using public transportation to save on fuel, or shop during sales only.
Go for Home Equity Loans
If you cannot borrow from someone but you have your own house then you can use it to get yourself out of debt. The home equity loan is just like borrowing money from your own self. Since the income tax rate is low you can save a lot this way.
Make Use of Your Life Insurance Policy
Most people have some money accumulated during their whole life through their insurance policy. You can borrow from your life insurance amount to pay your debt. Once, you get out of debt, you can set aside an emergency fund easily, so don’t think about the future consequences, just try to get out of debt as fast as you can.
Develop Smart Strategies to Pay Your Debt
The two most popular strategies include 1) The avalanche method 2) The snowball method
Now, let’s look into these strategies:
The Avalanche Method
According to this strategy, you should move in descending order of interest rate when it comes to paying off debt. Pay the minimum amount of lower interest debts and pay more on debts with higher interest rate. Repeat this process each month and soon you'll be out of the debt.
The Snowball Method
According to this strategy, it's better to pay off smaller debts first so that you can focus all your attention towards a single goal that is to pay off a large debt. Once you are out of smaller debts, you can use your funds, savings and bonuses to get out of large debt afterwards.
You can use any of the two strategies to pay off your debt; both will yield the positive results over time. The strategy selection merely depends on your will power as to how much you can do to get out of debt.
The snowball method is a longer process, but it involves small accomplishments that will keep you motivated towards your goal. The avalanche method provides fast recovery as you get out of your most expensive debt first and then the smaller debts become easier to pay off.
Stay Motivated and Don't Lose Hope
Paying off debt is not an easy task; it demands many sacrifices and compromises. It often makes life more stressful and miserable. Don’t consider yourself the only one with this problem, everyone faces similar difficulties related to debt issues. Stay focused and stay motivated to face unexpected hurdles. Remember that such situations don’t last too long and soon you will be able to get back in your routine, no matter what happens, keep your chin up and avoid any discouragement.
By employing the above mentioned strategies and smart ways to deal with debt, you can easily get out of debt in a short time. These result oriented tips can help you by cutting your budget and will make you able to pay off your debts.
Joseph Priebe takes pride in assisting audiences with his articles to help them make sound financial decisions.
With over ten years of experience writing financial content his goal at CASH 1 has always been creating engaging and easy-to-digest information for anyone searching for immediate or long-term monetary solutions.
When Joseph is not writing about personal finance, you can find him photographing the Southwest United States with his 4x5 Graflex Crown Graphic camera. He is based in Phoenix, Arizona.