How to get out of financial debt quickly and easily
Debt impacts your financial future, making it an uphill battle to reach your life goal. It can also invade every aspect of your life.
According to a CBS News study, 52% of Americans cited money as adversely affecting their mental health. But you can escape the shadow of bad debt by acting quickly and taking targeted actions to reduce your debt.
But what is the key to getting out of debt quickly and easily in 2023?
Overpay your debts
One of the biggest mistakes consumers make is only paying the minimum. Making the minimum monthly repayment means you are likely only paying the interest rather than the outstanding loan itself.
With 61% of Americans in credit card debt, paying the minimum ultimately means paying more in the long run. Over the years, this can result in spending thousands more than necessary to service your debts.
Paying as much as you can to target high-interest debts can help keep your head above water and enable you to keep more of your hard-earned dollars long-term.
Revamp your budget
Most people spend more than they need to on things they don’t require. Although discretionary spending is essential to enjoying life, unused subscriptions, and overspending can result in even more debt.
Avoid wasted money by tracking your expenses and targeting areas you don’t need. With credit card balances topping $1 trillion for the first time in 2023, cutting unnecessary spending from your budget can make a big difference.
Keep a firm hold on your budget to avoid unnecessary expenses from creeping back in.
Look into debt relief solutions
Debt relief solutions can come in several forms, including settlement, consolidation, and refinancing.
Most people wait too long to maximize the value of debt relief solutions because they don’t consider them until they get into real financial trouble. Moving early to examine your options widens your choices and enhances their benefits.
Examine regional debt relief solutions. For example, if you live in Charleston, there may be South Carolina debt relief options available.
Create a specific debt payoff plan
Debt payoff plans are your roadmap to paying down your debt. These plans can be formulated at home or with a qualified financial professional. Good plans provide targets and empower you to stay on track.
Two of the most popular models are:
- Snowball – Paying off your debts in order from the smallest balance to the largest balance.
- Avalanche – Paying off the debt with the highest interest rate first.
Regardless of which approach works best for you, a plan can make it easier to pay off your debts faster.
Apply for a 0% APR balance transfer
Accumulation of debt is one of the leading problems Americans face. This is in spite of the fact that two in five Americans believe credit card debt is embarrassing.
Consider a 0% APR balance transfer to a new credit card to prevent your debt from growing. You can take advantage of introductory offers and use this card to prevent interest from accruing while you work toward loan principal reduction.
Ideally, you will only use this card for paying off your debt. Although 0% APR balances remain, new purchases on said card may not carry this same 0% APR.
Consult your lender
It may seem obvious, but many debtors feel nervous about approaching their lenders and requesting a lower interest rate.
Creditors are businesses, and so want to maintain your business. Your creditor may be willing to lower your interest rate if you tell them about your situation.
Typically, this strategy has a higher success rate if you have a good track record of making timely repayments.
Use personal loans to consolidate your debt
Conventional wisdom states that you should avoid taking on more debt if you are already in debt. However, sometimes, it can work in your favor.
Applying for a personal loan and using the funds to pay off your debts can allow you to take advantage of a lower interest rate. It can also make managing your debt simpler because you are reducing the number of loans to one single repayable loan.
Negotiate lower bills
Reducing your expenses wherever possible can free up your dollars for debt repayment. Your existing bills, like your Internet plan, may be eligible for lower bills.
Services like TrueBill can automate identifying which bills could be lower and which could be eliminated.
Increase your income
Increasing your income is easier said than done. Investigate what your options are. If you haven’t requested a raise in some time, consider asking your boss. Even a few extra dollars can make a significant difference.
In a worst-case scenario, you may also have the chance to increase your income by taking on a part-time job. Seasonal work is especially popular for an extra windfall for paying off debts.
Consider bankruptcy options
Bankruptcy is the final straw for Americans who cannot work or pay their way out of their debts. Although it may be tough, various bankruptcy protections exist to prevent your creditors from coming after you.
Ideally, bankruptcy should only be used when paying off your bad debts would take longer than seven years, which is the length of time bankruptcy will stay on your credit record.
Note that bankruptcy does have its consequences, including:
- Loss of assets.
- Crippled credit score.
- Inability to take out additional credit.
- Some debts, like student loans, will persist.
In essence, bankruptcy comes with consequences, but it does enable you to enjoy a fresh start. If you are considering whether bankruptcy is right for you, speak to a qualified financial professional who can assess your case first.
Conclusion
Managing your debt can be complicated, but options are available to you. The answer is to ensure you act quickly and avoid burying your head in the sand.
Debt doesn’t go away just because you ignore it. Instead, you should be proactive and examine your options if you find yourself in trouble.
Proactive debt management bolsters your chances of getting out of debt, reworking your finances, and ultimately paying less.