If you’re having financial difficulties, you need to learn how to get out of debt fast. After all, being in a huge amount of debt causes you severe stress.
You first need to realize that debt repayment needs to be a priority. Once you’ve done that, it’s just a matter of following a few simple strategies.
That’s why we’ve put together these tips to help you get out of debt fast in 2018.
Know How To Get Out Of Debt Fast This Year
In this article:
- What Debt Can Do To You
- Know Your Debt and How Much it is Costing You
- You May be Able to Negotiate Interest Rates
- Consider a Balance Transfer or Debt Consolidation Loan
- Stop Borrowing
- Pay More Than “Minimum Payments”
- Make and Stick to a Budget
- Reduce Expenses
- Increase Income
- Enjoy Your Successes!
What Debt Can Do To You
Debt is an anchor preventing us from moving forward in life. It influences your life in ways you may not even realize.
While many focus on ways of increasing their pay, a debt snowball may be building in the background. This often keeps them from reaching their financial goals.
Debt can affect:
- Personal relationships
- Your ability to enjoy life
- Your credit score
- Ability to save money or establish an emergency fund
- Your health
Credit monitoring company Experian reports the average American consumer has 3.1 credit cards totaling an average balance of $6,354. High-interest credit card debt is a drain on financial resources, but it is just the start.
Have you ever wondered why people say “the rich get richer?” It is because the wealthy use money to make more money. They are not spending so much of their income servicing interest on their debt.
If you want to enjoy the freedoms and joys that come with living a debt-free life, here are ways to get out of debt fast.
Know Your Debt and How Much it Is Costing You
The sad truth is, many spend more time planning a vacation or researching the latest technology than managing debt. The first step in getting out of debt quickly is knowing exactly how much debt you have.
List the names of every entity you owe money to. Next to it, list the total “pay off” amount for that debt, the interest rate you are paying, and the minimum monthly payment. This is not always pleasant, but it gives you power.
You can choose to pay off smaller debts first, using that extra money to pay off increasingly larger debts. Others may decide that paying off higher interest debts is the wiser thing to do.
You May be Able to Negotiate Interest Rates
If you are keeping up with at least minimum monthly payments on credit card debt, your credit card company may be willing to negotiate your interest rate downward.
Simply make a call to your bank and see if you can ask for lower interest rates on your credit card bills. It is certainly worth a call to ask about your options.
Consider a Balance Transfer or Debt Consolidation Loan
Even if your credit card companies are not willing to negotiate your interest rates, you may have other options.
As the term suggests, balance transfer is the process of transferring your balance from one credit card account to an account from another credit card company.
In most cases, you’ll transfer your credit card balance to a card with a lower interest rate.
However, it is worth noting that transferring your balance is not the same as debt repayment.
Moreover, a balance transfer is not only applicable to credit cards. You can also transfer other debts such as a car loan and other monthly installment payments to a no-interest balance transfer credit card.
But before applying for a balance transfer, make sure to research and consult a financial professional to know if it is for you.
You can also see if you qualify for a consolidation loan. A consolidation loan is money borrowed to pay off higher interest loans like credit cards. Monthly payments and interest on consolidation loans can be significantly less than the total of the higher rate cards.
If you owe a substantial amount on your credit cards and are struggling to keep up with them, you can ask about a debt settlement with your card company. This is a one time, single-payment they may be willing to take to write off the debt you owe.
Want to know the easiest way to get out of debt fast? Stop accumulating debt! The easiest way to do this is to stop using your credit cards or applying for loans. Other than the smart use of a consolidation loan, borrowing more money is rarely a way out of debt.
Make a pledge that if you can’t afford to pay cash and don’t need an item, you will not purchase it. Save up to purchase larger ticket items rather than adding them to a credit card. Stop putting daily expenses like meals and gas on credit cards.
Pay More Than “Minimum Payments”
Minimum payments may only include an amount equal to 1% of your principal. Essentially, when you are making minimum payments on credit cards, you are only paying interest. This makes it virtually impossible to pay off your loan.
Always pay more than the minimum payment, even if it is only a few dollars more. If you stop using these cards and pay more than minimum payments, you will begin to see results in credit card debt reduction.
You can also save hundreds in interest if you make larger payments instead. For starters, choose to pay those with the highest interest rate first. That way, you get to pay off your debt faster.
If that is difficult for your situation, allocate 2 payments a month that are scheduled around your payday.
Make and Stick to a Budget
How to get out of debt fast? Make a budget!
Once you know your debts, add up your other “fixed” expenses like utilities, rent, insurance, taxes, gas, food, and entertainment. Add these to your monthly debt payments and you will see your total monthly expenses.
If your income is not sufficient to cover these monthly expenses, you have a problem. You will need to make adjustments in your “budget” to get these into alignment. Like borrowing, you need to make a commitment to stop overspending on unnecessary items.
After establishing a budget, what comes after is important- discipline and consistency. Without it, your budget will not work and you will encounter the same problems. As they say, consistency is key.
But we know that tracking your income and expenses can get tricky, especially when you’re an impulse shopper. A personal finance manager app can help you take control of your finances and set up a budget. A finance app makes it possible for you to access your financial records anywhere and anytime.
But still, do not forget to have an emergency fund. We all want to avoid bad things, but it’s better to be prepared and regret nothing.
Getting out of debt quickly can be done by freeing up more money to pay off that debt. This is often accomplished by reducing other expenses.
Look at everything.
Can you get less expensive insurance coverage?
How can you cut back on your electric bill, cable bill or cellphone?
Do you really need that $3 latte every morning?
Be frugal in the way you begin to handle money. It may be hard at first, but a little compromise and discipline can go a long way. Especially if you stick with it. Every dollar saved should go towards reducing what you owe.
This strategy helps if you want to begin paying more than the minimum each month. Reevaluate your lifestyle and think about what expenses you can do away with.
Another way to reduce debt quickly is to increase your income; again targeting extra funds toward debts.
Can you take on a part-time job? Perhaps you can take on extra hours until you are debt free. With work at home opportunities and ride-sharing services, gaining extra income is easier than ever.
Working is more rewarding when the result is a life free of debt. Investing can also be a good source of extra income to pay off your debt.
Use Excess Cash to Pay Your Debts
With year-end bonuses from 2017, you may be tempted to spend all your money on fun things. Don’t ignore your remaining balance, spend all your money, and then regret it afterward.
Also, avoid using your credit card. Use these bonuses to fast-track your debt payments instead. The last thing you want to do is incur more debt.
Credit cards offer convenience, but using it irresponsibly poses financial problems in the future. Make sure to always have extra cash with you- whether payments for your debts, bills, or purchases.
Make it a habit to set aside a portion of your bonus to consistently pay for your credit card debts. That alone is a significant step to becoming debt free and improving your credit score.
Manage Your Finances Properly
In short, remember the goal is to pay off your debts quickly. Prioritize your debts by doing the following:
- Avoid temptation until all your debts are settled.
- Reevaluate your financial decisions constantly.
- Plan for your future.
- Maintain your discipline in financial decisions
Enjoy Your Successes!
Paying off debt may not be the easiest thing to do. So knowing how to get out of debt quickly can help those who are struggling. Those who don’t have a financial adviser or someone to guide them can get lost in a sea of payments.
Living debt-free is one of the greatest gifts you can give yourself. Every time a debt is paid, it frees more funding to pay off other debts.
This snowball method reduces debt more quickly than many realize. Focus on how your life will improve without being saddled with credit card payments and other consumer debt. Keep your eye on the prize. It can be done, you can do it, and we are here to help!
If you want to know how to get out of debt fast, watch what changes a couple did in their lives to do this.
Knowing how to get out of debt fast will help you increase your savings in the long run. You can use most if not all of your income for your needs without worrying about paying off your student loan or credit card bill.
Follow these tips to pay off debt and improve your credit score in the future.
Share your own tips on how to get out of debt fast in the comments section below!
(Want even more tools to help you understand, manage, and track your get out of debt progress? Pair your debt payoff planner with the Ultimate Get Out of Debt Checklist and be on your way out of debt in no time. Download the free Get Out of Debt Checklist to help kickstart your debt free journey, here.)