Get Out Of Debt In These 7 Steps
Every borrower wants to get out of debt as soon as possible but believe me you can’t get out overnight. However, this process can happen sooner, or it can take several years depending on how you work it.
While the amount that you can afford to pay towards your loan influences the repayment period, the main secret lays within your commitment to follow through. The following steps can help you settle your debt as soon as possible.
1. Review how you got into debt
Everyone will tell you not to bother with the past. However, as far as debt management is concerned, the past cannot be ignored. To get out of it, you’ve to reflect back on the habits that led you there.
After finding out what led you into this situation, take all the necessary measures to prevent a recurrence of the same. This way you’ll have started your journey out of debt.
2. Work on a budget
Many people spend too much money on unnecessary things. Stop impulse buying and create a budget to control your spending habits. Make sure you keep a track record of all your expenses in a month.
Categorize your expenses and total up each category. The results will show you where your money is going. This is the time to adjust your spending on different categories. Find ways to cut back abnormal expenses. Always remember to stick to your budget.
3. Calculate the amount of debt you have
Don’t be that borrower who is oblivious of his/her debt. Face the reality and figure out the total amount. Use your credit report or bank statements to list all your debts in their actual amounts, interest rates and minimum monthly payments.
4. Figure out how to get extra money
Perhaps you’re already paying your monthly payments but believe me, this might take you a couple of years to fully settle. In order to pay the faster, you must pay more than the minimum monthly payment towards your debt each month.
Therefore, you must figure out how to get extra cash. You may have to cut back on your expenses and look for ways to increase your earnings. Consider taking up a part time job to increase your income.
5. Create a plan
Put together a simple plan. Give priority to your debts depending on interest rates, balance or other parameters. From there, figure out how much you’ll be paying each month.
This is one of the best way to make a lump sum payment of the pressing issues while paying the minimum towards other debts. When you successfully pay off one debt, you can redirect the lump sum payment to other debts based on priority.
6. Pay off the debt
Now that you have got a plan and the monthly amount for each, consistently send the payments each month. This duration will depend on the amount of debt and your monthly payments. Create debt milestones to help you realize your progress and keep yourself motivated.
7. Bounce back from stumbling blocks
The journey towards freedom may not be smooth because of the monthly payments. It’s a journey full of discouragements, but that is natural.
As simple as that, by the time you get to step 7, you’ll be miles away and moving towards freedom. Please share your comments with us and tell us whether this post was helpful to you.
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