Getting into debt is surprisingly easy, although getting rid of debt is often looked upon as a monumental task. After all, it could take years to pay off debt that you might accumulate over a few months. When it comes to managing debt effectively, a little prudence is never out of place. However, what can you do if you already have debt that seems like a burden?
Organize and Evaluate Your Debt
Not all forms of credit have the same impact on your finances, so it’s important that you start by organizing and evaluating your debt. Make a note of all the creditors you have, along with their corresponding balances, monthly payments, and interest rates. Identify the ones with the highest interest rates, and work on paying as much as you can toward them. You might also benefit by taking a look at how much you pay as annual fees toward different credit cards.
Create and Stick to a Budget
Make a list of your monthly expenses and subtract this amount from your monthly income. The money you have left is essentially what you can pay toward your debt. If this amount is insignificant, determine how you can minimize your monthly expenses. In such a scenario, consider doing away with expenses such as cable TV subscription and eating out. As you work your way toward reducing your debt, you can get back to your usual lifestyle.
Think About Balance Transfers or Debt Consolidation
Try to negotiate a better interest rate with your credit card providers. This might work if you have good repayment histories. In case this does not work, you may consider transferring balances of credit cards with high interest rates to credit cards that comes with balance transfer offers. Some offer 0% annual percentage rate (APR) on balance transfers for 12 to 18 months.
If you have multiple debts, going the debt consolidation way might work well for you. In this scenario, you basically combine all or most of your debt into a single loan. This way, you have only one monthly repayment to worry about, and you may get a competitive interest rate if you have good creditworthiness.
Pay as Much as You Can
If you have a credit card debt of $2,000 at 18% APR and keep making the minimum monthly repayment of $35, you will take 10 years and 11 months to repay the balance. This is if you make no additional purchases in between. Besides, you end up paying around $2,575 as interest. Paying as much as you can toward your debt not only helps you save money in the form of interest, you also end up clearing balances sooner.
Use Money From Different Sources
A quick way to reduce your debt is to pick up a side job. Depending on your skill set, you may consider looking for freelance work on platforms such as Upwork, TaskRabbit, and Fiverr. While getting a side hustle requires time and effort, the money you get can help you achieve financial freedom sooner. Money you get through an annual bonus from your employer or as a gift from a family member can also make a difference in reducing your debt.
Getting out of debt is not as hard as you might imagine, especially if you’re willing to take measures to rectify the problem. For starters, you need to stop adding to your existing debt. You also need to understand how different types of debt work, and make repayment plans accordingly.
About the Author
Jon works as a researcher with iCompareFX. This website lets its users compare the world’s top overseas money transfer companies in an easy way. When he’s not working, Jon likes exploring music from across genres.
Originally posted 2019-06-07 06:57:57. Republished by Blog Post Promoter