Debt isn’t uncommon in today’s world. Even if you don’t need financing for most normal purchases, you usually can’t get by with cash for things like cars and houses. That’s why the average American holds an average of $96,000 in debt.
Unfortunately, this can lead to long-term problems if you have trouble making payments or don’t save money.
Getting out of debt can be one of the most challenging things a person does, but there are things you can do to make it more achievable. Keep reading to learn eight strategies that will help you get out of and stay out of debt.
- Pay More Than the Minimum
One reason it takes so long to pay off debt is the interest. The monthly amount you pay doesn’t all go to the principal balance. Depending on your interest rate, much will go to the interest portion.
You need to reduce your principal as much as possible to pay down your debt faster. Make additional payments to your principal amounts to reduce the total amount you owe faster. As a result, you’ll pay less interest over time and pay off your debt faster.
- Pay Off High Interest First
The chances are good that you have debt from several sources. You have credit cards, auto loans, personal loans, mortgages, and more. Not every interest rate for your debt will be the same.
You’ll pay more money overall if you avoid paying your high-interest debt. You’ll pay more in interest monthly and be less able to pay off your principal.
Try to pay off your high-interest accounts first. You can focus on your low-interest debt after taking care of the accounts costing you the most.
- Consider a Balance Transfer
Do you have a lot of debt on credit cards? If so, you have options if you can sign up for other credit card accounts. You can use a balance transfer to move your debt to 0% interest rate accounts.
Many credit cards offer no interest for the first year. If you can move your credit card debt to those accounts, you can avoid the interest payments and focus on ways to decrease your debt without the high interest.
- Negotiate Your Bills
In some cases, the price you pay for your bills isn’t only up to your account holders. It’s possible to speak to your providers to see if there is anything they can do about your bills.
This will likely be your utilities, phone, and other bills. Look at your other options and call your providers to see what they can do to convince you to stay with their services.
You can use the extra money you save to make extra payments on your debt.
- Take Gig Work
You don’t only have to reduce your expenses if you want to get out of debt. The speed at that you can pay things off ultimately depends on how much money you make.
That makes taking on more work one of your best options to pay down debt. Once you factor your extra cash flow into your debt management plan, you can take a portion of your extra earnings to make extra payments on your principal.
You have many options for doing this, as well. You can take on gig work with apps like food delivery or use your skills to freelance online.
- Consolidate Your Debt
If you’re like most people, you have debt from several sources. You’ll have extra monthly payments, interest rates, and payment rates. This can be complicated to keep track of and expensive with higher interest rates.
However, you do have options. Many personal loans available will help you consolidate your debt to make things easier.
A personal loan will leave you with one monthly payment, a lower interest rate, and a smaller monthly payment. This simplification will make it much easier to tackle whatever debt you have. Apply for a personal loan today to see what options are available to you.
- Negotiate With Collections
In some cases, your debtors will pass your debt to collectors. This happens when you have problems making payments and show no signs of being able to fulfill your obligations.
Since these debt collectors buy debt at a lower rate, they’re more willing to work with borrowers to settle the account.
Call whoever holds your debt to see if you can make an arrangement. In many cases, they will allow you to make a single lump sum payment below what you owe and above what they paid for the debt.
This will reduce your total payments and allow you to clear a collection account off your credit report.
- Make Use of Cash Windfalls
From tax refunds to inheritances, there are many times when you’ll receive a cash windfall because of a life event. Many people use these cash influxes to purchase things they need or something nice. The question is, will you be able to buy those things a little later by eliminating debt and reducing your monthly expenses?
In most situations, your cash surpluses are put to use better by paying off debt. You’ll be able to save more money monthly and eventually purchase the things you want to buy today.
All it takes is a little patience.
Getting Out of Debt Is Within Your Reach
Being in debt is one of the most stressful things someone can go through. You can never get ahead because all your free cash goes to paying off what you owe.
But getting out of debt is possible if you make intelligent choices. Follow the advice above and try the different strategies to see how well they work for paying off debt.
Do you want to read more advice on what to do when you have no debt and free cash to invest? Check out the blog to read more.