Lost in a deep dark pit of debt and despair? Well, stress no more because by this time next year you could be considerably better off, or even have rid yourself of debt completely! In fact, all you need to do is follow the savvy advice in the post below. Oh and maybe think twice before you charge your next purchase to your credit account!
Be savvy with repayments.
First of all, it’s vital that you assess what you owe to ascertain where the biggest need to make repayments is. After all, some debts may be costing you a great deal more than others because of the interest rate you are being charged.
An interest rate is a fee that a lender adds on top of your borrowing, and different loans and lines of credit will charge different amounts depending on the company that is offering them, your credit score at the time, and their policy.
Of course, it makes sense to see which lender is charging you the highest rate of interest overall, because it works on a percentage basis. That means the lender with the higher rate will be costing you more, so much more in fact that if you are only paying off the minimum each month, you may not be clearing any of the original debt at all. Something that makes it incredibly easy to fall into the debt trap, and very hard to get out of it again.
Therefore, instead of picking the loan that you own most on to repay first, consider choosing the one that has the highest interest rate. It could save you a fortune in the long run, money that could be put too much better use in cleaning off the rest of your debts or improving the quality of your family’s life.
Also, be aware that old loan and credit card debts may have run out under the Statute of Limitations. What this means is that you are no longer under any legal obligation to pay these off. This is hugely useful to now because it means you can focus on your more recent debt, and it also gives you a much better opportunity to work on clearing newer debt, because you won’t have to find so much money overall.
Put your savings to good use.
Next, when it comes to getting out of debt quickly, you really need to get your head around using all of the resources that are available to you. What this means is that any money you have saved, apart from an emergency budget, should be used to clear your debts.
Now, I understand that many people don’t want to part with their hard, saved money. In fact, it can make them feel a lot more comfortable with their financial situation knowing they have cash in the bank. However, for the same reason that you need to pay off the loan with the highest interest rate first, paying off outstanding debts with savings is actually a savvy move.
This is because the rate of interest you can expect on your savings will be around 3% maximum. Yet, the rate you are losing to debt can be anything from 12% – 35%, and much higher in many cases as well. Therefore if you use your savings to pay off the debt, you will be better off because you won’t be losing 12-35% and only making 3%.
Of course, we are not saying that you should put every penny into clearing your debts, as it’s always a smart idea to have a little tucked away for a rainy day. Then you can be sure you will have your finances covered even if something unexpected happens.
Another possible method that can help you get out of debt within a single year is to consider consolidation. In particular, debt consolidation for bad credit can make all the difference in canceling what you owe off as quickly as possible. The reason for this is because you can cover all your credit card debts, which you may be struggling to pay in one loan.
Then you will benefit not only from having no outstanding credit card loans but also won’t have to worry about keeping on top of many different cards and payment each month. Something that means it can be much easier to know precisely when you have met your debt payments, as well as minimize the risk of late payment fees and further damaging your credit score.
In fact, many credit card consolidation agencies will work with you to find a payment amount that is viable for you to pay each month. Something that can actually help to raise your families quality of life, while still getting rid of your debts, and helping to rebuild your credit score.
Increase your income
Last of all, when it comes to getting out of debt quick, it can be massively helpful to increase your income for that year. Now, how you do this is entirely up to you, but one possibility is to consider asking for a raise at work or taking on a side hustle.
A side hustle is a second income stream that is separate from your job. Yes, you will have to do the work for this in your spare time, but choosing a side hustle that has an element of fun to it can help offset this sacrifice. For example, it may be that you decide to write an eBook in the form of a novel or even a ‘how-to guide,’ something that can be a satisfying and even enjoyable project, as well as a way of generating extra funds.
Of course, picking a side hustle such as writing a book, or creating downloadable printables it a particularly smart way of helping yourself to get out of debt. The reason being that once you have created the item, you can then sell the same thing over and over again. Something that makes it so much more convenient option to help to pay off your debts in term of the time you have to put in, especially if you are already working hard at your other job.