Getting a loan helps when you don’t have enough money on hand to fulfill personal financial needs. You can borrow a loan for paying rent, college tuition, or buy a new home or car. But not paying that loan according to agreed terms can build a mountain of debt that can ruin your overall financial health.
Whether you are struggling to pay credit card balances, a mortgage loan, a line of credit, or a student loan, managing and paying off debt is possible. You can do it yourself with the right strategy, tools, and determination. Here are some easy ways to save more while paying down your debt and tips to improve your habits for better financial health and freedom.
Build a Realistic Budget Plan
Tracking your income and expenses should be your major concern when it comes to paying off debt. You can do it by creating a monthly budget plan. Creating a budget is an effective way to get organized and have a clear picture of your finances. This will give you an idea of how much you can pay towards debt each month. Creating a budget can be as easy as a spreadsheet with all your incomes and expenses or as complex as using budgeting apps linked to your account. some budgeting apps let you track incomes and expenses along with monthly debt payments.
Assess All Your Debts
Make a list of all the loans you need to pay and get a final figure to be paid. This will also help to calculate how much you need to pay towards the principal amount and what is the interest rate. Having all your loans on a page makes creating a debt repayment plan easier and more effective. You can also sort your debts based on the interest rate and the full amount to be paid.
Pay Off the High-Interest Debt First
The debt avalanche is one of the best debt repayment approaches and lets you pay off the most expensive debt at first to help you save bucks on the interest rate. In this debt repayment method, paying off the high-interest rate loan should be your major concern but you should also continue to pay the minimum towards less expensive loans. This debt repayment strategy saves a lot of bucks in the long run and helps you get out of debt as faster as possible.
Take Advantage of Balance Transfers
When you are struggling to pay a hefty balance on your credit card, a balance transfer could be a lifesaver for you. A balance transfer credit card allows you to move your balance of a high-interest credit card possibly taking advantage of a 0% introductory APR period. By doing so, you can pay off credit card debt easily without paying a single penny towards interest. However, you should pay off the balance within a given timeframe to enjoy a 0% interest rate. Otherwise, you will be paying a higher interest rate than your current card. The card issuer may charge you a fee for a balance transfer. Due to poor credit history, some individuals may not be able to apply for a balance transfer credit card. So, make sure to check if you can apply for the card and pay off the balance according to the agreed terms.
Stop Using Your Credit Card
Overspending can cause you to add to your debts pointlessly. This is the reason, experts recommend avoid using your credit card when you are paying off debt. Wise use of credit cards also makes sense here. Just swipe it for a little transaction throughout the month and pay the balance in full before the due date. This will keep your spending to a minimum and build good credit scores as well. Also, remove your credit card details from online stores and eCommerce stores to avoid unnecessary charges.
Adopt Good Spending Habits
Overspending is always bad for you especially when you are in debt. Be honest with your financial situation and develop good spending habits to get out of debt faster and gain financial freedom. Make necessary lifestyle changes to avoid useless and unproductive spending to save bucks for debt repayment.
Increase Your Income with a Side Hustle
The more you earn, the faster you can get out of debt. Increase your monthly income by taking a part-time job or by starting a freelance project. And use the extra earnings to make more debt payments in a month. In this way, you can speed up the debt repayment process to save lots of bucks on interest payments.
If want to get out of debt quickly while saving some bucks at the same time, above mentioned strategies can help you reach your goals. You should also track monthly payments toward debt and overall repayment progress to see how fast you are moving towards your destination of financial success and freedom.