Many people find it very difficult to pay debt because of many factors and different reasons. In this post, Diana Degarmo, our guest writer will discuss on how to effectively eliminate your debt.
The recent financial hardships, like job loss and wage reduction have caused many people falling into overwhelming debt. Being in debt is not at all a rosy experience for an individual since it takes a toll on both the health and finances. However, there is nothing to be worried about it since there are many ways to pay off the debt and achieve debt relief. So let us take a closer look at some of the debt reduction ways that you can do.
1. Make more than minimum monthly payment
Making minimum monthly payment hardly reduces the outstanding balance on debt, so it is advisable to pay more than minimum in order to pay off the debt as soon as possible. If you are paying $100 each month, double it to $200. Remember, the longer you will take to repay the debt, the more interest rate you will have to pay.
Now you may wonder how you can afford to pay more than minimum. Simply create a budget and abide by it. Compute all your income and expenses, and determine if the latter is higher than the former. If so, cut on your expenses and save money to pay more towards your debt.
2. Play with your debt payments
If you want to pay off your debt as fast as possible, pay off the highest interest debt first. Transfer the balance on your highest interest rate credit card onto the one that offers the lowest interest rate. However, if the entire balance does not fit on one lowest-interest card, pay the minimum amounts due on all the cards except one. Then transfer the majority of the debt payments onto that card and pay it as soon as possible. Once it is paid, continue this process onto the next card.
3. Liquidate your savings account
Taking out money from savings account and using it towards debt repayment is a highly common practice. But you should only take out the amount that is required so as to avoid falling further into debt. Moreover, if you are approaching towards retirement, then resaving the same amount might not be an easy task. So do not cash out more than what you require.
4. Seek help from friends and family
To pay off your debt, you may also borrow money from your friends and families. The advantages about borrowing money from near and dear ones are that they will charge you lower interest rate and will not bother you to repay the money. But before borrowing the amount, get everything in writing in order to avoid future misunderstandings. Review the paper work and see if the interest rate and repayment schedule have been mentioned. Adhere to that repayment schedule and pay off the money soon.
5. Obtain a home equity line of credit
If you own a house and have equity in it, consider the option of taking out a home equity loan to pay down the debt. Consolidate your multiple bills into the loan and pay them off as soon as possible. This not only helps you paying off your debt fast but also saves you money.
6. Renegotiate with creditors
If you think that none of the above mentioned ways are suitable for you then renegotiate the payment structure with creditors. Let your creditors know about your financial hardships. If you can explain your financial situation to the creditor, you might be surprised to see how creditors are willing to work with you. Ask for a new and affordable repayment schedule so that you can pay off your debt quickly and easily.
7. File for bankruptcy
Bankruptcy is a legal status of an insolvent person or an organization, that is, one that cannot repay the debts owed to creditors. There is no doubt that bankruptcy is an effective way to eliminate the debt, but many people consider it as a last resort. That is because it ruins the credit score for as long as 7 to 10 years. However, many times in life, people hardly have an option other than filing for bankruptcy.
In conclusion, a fore mentioned are some important ways to pay off the debt and eliminate financial stress in life.
Image by Stuart Miles