One study estimates that every American owes over $7,000 on their credit cards alone, and the average total debt loan per person is over $15,000. In addition, each college graduate is already burdened by loans that exceed $35,000 when they leave college. Are you surprised by the statistics?
Most of you owe thousands of dollars worth of debt. And every month, you pay an interest on the borrowed money – interest that adds up over time. So why not pay off all debts as soon as possible? Once you’re debt-free, you wouldn’t have to pay monthly payments or an amount of interest.
Sounds harsh? How will you repay your loans? As difficult as it may be, if you are determined, you can take good control of your financial situation. We will share with you some amazing tips to help you pay off your debt soon, and then we will talk about what you should do once you are debt-free.
1. Pay more than the minimum amounts
This is a tip that applies to your credit cards, student loans, and other personal loans. In terms of credit cards, a person’s average balance is about $15,000, as we mentioned earlier. If the APR is 15%, it means that the minimum amount to be paid to the bank is only $625, which you will repay in about 13.5 years. Isn’t that too long? Let’s not forget that it will take longer for you to withdraw the borrowed amount if you continue to use your credit cards for other purchases during this time.
Instead of paying the minimum amount, your monthly payments should be as large as you can afford. This will help you save thousands of dollars in interest and you can repay your loan much faster. But before you take advantage of this tip, contact your bank and make sure there are no penalties for prepayments.
2. Try the snowball method
The snowball method is a popular strategy for paying off your debt, which in turn is based on paying more than the minimum monthly amount. List all your debts, starting with the smallest one, that you will tackle first. Use your excess funds and pay out more than the minimum amount for the smallest debt. For your other major debts, you would still pay the minimum amount.
Now that you’ve paid off the smallest debt, you can move on to the next debt on your list and start paying more than the minimum amount for that. This way, you can continue to pay off all the debts one by one. When your small balances disappear, you release more dollars, which allows you to pay off your larger debts faster. The basic goal is to use up all your extra money for the debt, starting with the smallest ones until you’ve paid them all.
3. Try to increase your income streams
How many sources of income do you currently have? If you’re just doing one job, how about dedicating yourself to other part-time businesses or ventures to make more money? This gives you more control over your finances and makes it easier for you to become debt-free.
Think about your strengths and see how you can use them. Create an account on sites like Upwork, where you can work as a freelancer in a variety of industries. And even if you’re not a technical maestro, it’s absolutely fine. You can still babysit someone, mow yards, or take a cashier job at a local store. So earn some extra money and use it to pay off your debt. And again, do this through the snowball method we’ve already discussed.
4. Create a bare bone budget… and stay that way
One of the best and most effective ways to pay off your loans is to reduce all your expenses and spend only the minimum required. As difficult as this may be, it’s all one of the fastest ways to get debt-free, and definitely worth a try to improve your financial situation.
You can create a bare bone budget that allows you to reduce your expenses as much as possible and live on only that, which is absolutely necessary. Since you all have different needs, your bare bone budgets will also be different. But a common cause would be the fact that the budget would be free of luxuries like eating out or watching movies. Avoid all unnecessary expenses and use the amount you secure to pay off your debts. By the way, if you’re debt-free, you can revise your budget and increase your expenses, but only as much as your income allows you to. Don’t take on more debt to satisfy your cravings and desires.
5. Sell items you don’t need
An easy way to get quick money that allows you to pay off loans. Go through all your stuff and put aside the things you really need and use reguDer President. — I call the Group of the European People’s Party (Christian Democrats) and European Democrats sell all the remaining things now and then use the money to become debt-free. The easiest way to sell items is probably a garage sale. However, if you’re not allowed to do one in your neighborhood, you can sell online on various sites like eBay.
6. See if you can get a lower interest rate on your credit card
What are the fees and interest rates for your Credit card? And how much money goes into them? In general, these amounts are on the higher side and often consume a large portion of your expenses. But sometimes lenders can postpone and revise your installments if you have a good credit history and made on-time payments. So talk to your credit card provider and try to negotiate more favorable terms.
7. Negotiate your invoices
Didn’t your credit card provider agree to lower interest rates? Don’t worry – try to negotiate your other monthly bills now. Yes, you can talk to your utilities, and they would usually be more than willing to give you a better deal. Start with your satellite TV and cable service provider, as they tend to negotiate the most eagerly. Prepare for the meeting, find out about the rates of other service providers and then present your case. What if it doesn’t work? You still did your research, didn’t you? Switch to a provider that offers a lower fee for a similar package. You can also negotiate your internet bills in a similar way. And by the way, bundle your internet and TV bills together if you haven’t already, because you can get better prices if you choose the same provider for both. Also, try to negotiate your medical bills, insurance premiums, and rental amounts.
8. Consider transferring funds
Another strategy you can try if your credit card provider doesn’t agree on lower rates. Balance transfer options are widely used, and if you do some research, you can even find an option that allows you to claim 0% APR for about 12 or 15 months. There may be a small fee, usually about 3% of the amount transferred, but then this is still a good option. In the long run, you can save money that will allow you to pay off your debt faster.
9. Combine your debts
The combination of debt and credit or the combination of invoices allows you to simplify all your bills by consolidating all your debts into a single monthly payment. Not only is the loan easier to manage, but you can also get a lower interest rate. The option can be used for multiple debts, multiple creditors, and multiple payments. All of these bills are paid through a debt management program, after which you make a single payment every month for the next 3 to 5 years. When you pay off all your debt with a new individual loan, you’ll enjoy several benefits such as lower monthly expenses, better cash flows, greater savings, and less stress. Before you sign up for a program or loan, it may be a good idea to discuss all possible debt combinations with a financial advisor.
10. Consume your bonuses or increases
Has your employer rewarded you with a bonus or a raise this year? Or maybe you’ve received a tax refund. What kind ofn additional money you also always get, avoid spending it on something unnecessary. Instead, use it for your loans and pay more than the minimum amounts.
11. Get rid of your expensive habits
Are some of your habits too expensive and take up a significant portion of your monthly expenses? If you are in debt, you should try to get rid of all your costly habits. Find out how you spend money on a daily basis and then evaluate whether or not those purchases are actually worth it.
Drinking and smoking are habits that you should definitely give up, not only to reduce your expenses, but also to improve your health. If you eat out frequently, avoid that too.
12. Avoid using credit cards
If you want to pay off your debt earlier, you should completely stop using credit cards so that you don’t increase the amount owed. Seems hard? Leave your cards at home instead of keeping them in your wallet. If you need to use them for an emergency, make sure you pay the full amount next time so that no interest is added. Another option could be to use a debit card that funds the transaction from the amount in your bank account. You only use your own money so you don’t top up your debt.
Now that you’re debt-free
Follow our advice, and you can pay off all your debts. And once you’ve achieved that goal, what do you do next? Here’s what we’re proposing.
Treat yourself to something
Because you really deserve it after all the efforts to successfully minimize your expenses to become debt-free. So allow yourself to relax, buTu nothing too wasteful.
Rethink your budget
So far, you’ve paid off all your extra money for getting rid of your debt, but now that the goal has been reached, you can use the money for something else. Do you think you burned yourself at work? Then go on holiday. Or you could use the money for a home improvement project.
But whatever you do, come up with a proper financial plan. And this plan should not be based on borrowing more money. Because if that’s the case, there was no point in becoming debt-free.
Higher savings
Now that you’re debt-free, you can think about increasing your emergency funds. If your savings accounts are already impressive enough, you may be able to start saving for a new car or a down payment if you live in a rented unit.
Increase your retirement savings accounts
How much money have you set aside for retirement so far? Find ways to improve your retirement savings. You can either increase your monthly contribution or sign up for a different plan.
Keep in mind that if you increase your contributions by just 5% or 10%, they add up in the long run and become significant when you retire.
Consider alternative investments
Because an extra income is always desirable, right? Invest your savings in a new project or business. You could enter the real estate market, the stock market, or any other industry. It all depends on the amount you are willing to invest. Whatever you choose, analyze the risks and develop effective mitigation strategies.
Set up a side business
You can even start a side business if you have enough time and entrepreneurial skills. Get it right, and if you’re lucky, you may not have to work anymore.
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Wendy is now a financial analyst and writer. Wendy has been writing about finance and personal finance since she was a sophomore in high school. She has also been writing for several online publications and published in The Huffington Post, and Forbes Woman.
Wendy is a credentialed financial analyst and has experience working with financial institutions and businesses. Wendy is also a certified financial planner. When Wendy's not writing, she enjoys tending to her many plants, watching TV, and spending time with her family.
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