No one likes to be in debt, so we are always looking for ways to get rid of our debts as fast as possible. We all know how quickly and all of a sudden, certain circumstances can shake up our financial situation, from various emergency cases, job loss, or unexpected home repairs. In a way, we are a nation in debt, and more than half of us spend more than what we earn on a monthly level, according to a research study. So in order to help you repay your debt sooner than later, we gathered some useful tips for you.
If You Do Not Have a Plan, Make One
It sounds so simple, but it is not. And do not neglect the power of a good plan. When it comes to financial stuff, you should always be well organized; otherwise, you can end up even deeper in debt. If you have several debts, make a list with interest rates for each one of them. Find the one with the highest interest and focus on it by making bigger repayments. When this one is paid off, start with the next one with the highest rate.
The So-Called Snowball Effect
This is quite similar to the previous tip, but the process is reversed. You make a list of all your debts and focus on the smallest one. Use all your extra funds to repay it quickly, and then move onto the next one. You should be able to eliminate the smaller debts in a short time while making minimal payments for higher ones, and then once you get rid of them one by one, you can add more money to your larger loans. This method also has a great psychological effect.
Take It Easy With Credit Cards
Let’s admit it; we all go crazy from time to time and lose control when shopping with our credit cards. Sometimes it almost feels like it is not real money, but it is. So while you are in the process of paying off your debt, control your spending because not adding onto balance while repaying the debt will have a positive impact on your credit utilization. Credit utilization plays an important role in your credit score, so as long as you keep it low, your credit score will grow.
Consider Balance Transfer Loans
If you ever wondered what are balance transfer loans, you are about to find out. Balance transfer loans allow you to repay up to twelve different debts at once. This type of loan comes with a low annual percentage rate (APR) that does not vary and fixed monthly payments. Another advantage is the so-called grace period. It usually lasts 12 months, during which you do not have to pay the interest.
In some instances, lenders or banks can offer to combine several loans with high-interest into one with a lower interest rate. This can be a significant help since it is much easier to manage one single payment, financially and psychologically. However, you have to keep in mind that repaying a loan over a longer time frame can mean that you will pay more in interest, but the trick is to try paying it down as fast as possible.
Make a Garage Sale
We are sure you have so many things in your home that you no longer need or use, you just have to say goodbye to them. Not only you can get some quick cash, but you will also get some extra space, and your home should be easier to maintain. You can sell anything online, from old electronic devices to clothes and some household goods.
Control Your Spending
It is so easy to spend money on things you do not need, so in times when you badly need every cent, it is time to cut down all expensive and unnecessary habits. The best way to become aware of how much you are spending is to write it down. At the end of each day, write down all the things you have paid for during that day and calculate the prices. Once you have it all black on white, you would be shocked by how much you are spending on nothing. Hopefully, that should do the trick and force you to control your spending.
The Bottom Line
Paying down your debt is never easy. But the sooner you become aware of the situation and try to sacrifice a bit for a while, the sooner you can leave all that behind you. We hope our tips will help you improve your financial situation.