Being in debt can be overwhelming, and depending on how much debt you have, it can sometimes feel impossible to get out of. And while it does take planning and consistency, it is doable! There are a handful of different strategies to pay off debt as quickly and as stress-free as possible, and as long as you stay focused and organized on the priorities in front of you, these tips will help you understand how to get out of debt.
Calculate Your Monthly Expenses and Income
Before you can even begin to plan out your debt repayment, you first need to know how much money you have left over to put toward those payments. Add up how much monthly income you are taking home after taxes (your net income), then subtract your basic expenses each month, such as your groceries, rent or mortgage, car payments, utilities, etc. If the amount you have left over is not enough to put towards your debt repayment, you may need to consider where you can cut expenses or increase your income.
Re-evaluate Your Interest Rates
High interest rates are one of the biggest roadblocks to paying off debt, and the longer your debt repayment term, the more you will accrue in interest. There are a few ways you can attempt to reduce your interest rates, including:
- Finding out if you can negotiate a lower interest rate with your lender, either temporarily or permanently. This might be an option if you have a good payment history and good credit.
- Using a balance transfer card with an introductory 0% APR. This allows you to transfer an existing credit card balance to a new card that charges low or no interest for an introductory period.
- Consider a debt consolidation loan, which allows you to combine multiple high-interest credit cards or loans into one lower-interest loan.
Determine Your Debt Repayment Plan
There are two very common strategies used in debt repayment, which include the “avalanche strategy” and the “snowball strategy”.
- The avalanche strategy — This approach suggests that you firstly ensure you are making the minimum payments on all your debts, and then anything you have left over should be put toward paying off your highest-interest debts in order to save the most on interest in the long run.
- The snowball strategy — This approach encourages you to put any extra money you have toward your smallest balances so you can eliminate your smaller balances more quickly and shorten the list of accounts you need to pay back. As you knock one off the list, move on to the next smallest balance.
It’s also important to ensure you deal with any debts that are in collection first, as those overdue payments will have a negative impact on your credit.
Take It One Step at a Time
Getting out of debt is a challenge and can be high stress, but once you have a plan in place, stick to it and do the best you can to achieve that goal. On top of that, it’s important to be conscious moving forward that you’re not falling back into any old spending patterns or life decisions that could lead you toward further debt. And if you have additional questions or need further help understanding how to get out of debt, reach out to our expert team at 800-526-9127.