Before you read the tips & tricks written in this blog, you need to believe in one thing – Getting out of debt is truly possible.
And it starts with commitment, a little consistency & a few changes in your lifestyle so you can become debt-free.
Just give it some time, stick to your efforts & follow these 8 steps to pay off your debts –
This 1st step is extremely important.
It’s necessary to be aware of your situation because it will help you create a plan to get out of debt. While making the list, include the name of the creditor, amount overdue, interest rate and the minimum amount required.
This way, you’ll be looking at the bigger picture which will help you prioritize your repayments.
One way to avoid debt is by repaying more than the minimum amount. But if you have too many ongoing debts, take it one step at a time. Start by repaying the minimum amount on all your debts.
Before you prioritize your repayments, consider your monthly income, expenses, and savings.
Then, list down the interest rates, size of the debt, minimum payment required, and the impact on your credit score.
Next, choose the debts you want to repay first.
The two best ways to go about this are;
This method is also known as the debt avalanche method.
It is the method where you repay debts with the highest interest rate while paying a minimum amount on all other debts.
This method is also known as the debt snowball method.
Here, you will repay debts that have low loan amounts while paying a minimum amount on every other debt.
Reducing your expenses will give you more room to repay your outstanding debts.
Once you take more control of your spending and stick to a budget, you will automatically start managing your debts better.
Make a list of all the things you spend your money on – rent, groceries, electricity bills, fancy dinners, Netflix subscriptions, everything!
This will help you understand where you are overspending & cut down on everything that’s unnecessary.
If you’re confused about how to get more control of your spending, there are many money management apps that can help you.
For instance, with Zype you can view all your account balances, get a visual representation of your spending & even set monthly budget goals.
Identify extra income sources which don’t take more than 2-3 hours of your day.
Data entry, content writing, online teaching, and other such activities can turn into a source of income that is just dedicated to repaying your debts, bringing you closer to your goal.
Having an honest conversation with your creditor goes a long way.
If you’ve been using a particular credit card or loan app for a very long time & have shown a good track record, talking to them could make your life easier.
You can try negotiating with your creditors to reduce your interest or debt amount.
If not, you could always negotiate to get a longer period to pay off your debt.
Yes, repaying the minimum amount, minimizing expenses, and creating a repayment plan are all very important steps.
But you would only be able to do this with a calm state of mind.
Of all the tips mentioned before, having patience & giving it time is one of the most important steps.
Just trust the process and keep doing what you need to do, and you will surely be able to pay off your debt.