10 Steps that can Help you Get Rid of your Debt

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Are you surrounded by unpaid and uncontrollably increasing debts and credit bills? Are you afraid even to open them? Are you dreaming of a “debt-free life” with no more tension of being a debtor? Do you want to feel free from the burdens of due dates and minimum payments? Well, it’s not too late and you are not alone either. Most people in the world are caught up in the chains of debt in one way or the other. The availability of too many varieties of bank loans and credit card options make us forget to keep a check on our expenses. It makes us more careless as the flow of money out of our cards is not literally known. Thus we end up with huge bills for which one may not even have enough bank balance to pay the minimum amount!

The incessantly growing expenditure and the current cost of living make it difficult for anybody to manage their bills. But there is always a solution to get rid of debts. It’s not magic. You can’t get over all of them at once, in a single day. But you can get rid of them eventually by a well planned step by step process. Here are some steps that you can take to get rid of your debts in a more practical and simpler way.

 

10. Stop taking loans/ using your credit card

10. Stop taking loans/ using your credit card

 

You already have enough debts. So don’t add more to it! The reason for your debt is “yourself”. Stop borrowing money or taking loans and start using the cash that you have in your hands. Using cash will act as a check point. When you use your credit cards, you forget how much you actually have and forget to check how much you spend. So, stop using all your credit cards, as you have enough bills waiting for you at your doorstep, to be paid.

 

9. Calculate how much you owe

9. Calculate how much you owe

 

You know you are being strangled by debts and bills. Now it’s time to confront them. Sit in front of your computer, or use a calculator and calculate how much you owe, what is minimum amount to be paid and what are the rates of interest to be paid for each loan. Find the one in which you are closest to the balance. Arrange them in the order of highest rates. In this way, you will get a clear picture regarding the amount of debts you have and you can plan to pay them accordingly.

 

8. Pay the minimum or more for all debts

8. Pay the minimum or more for all debts

 

If you have many different kinds of loans and credits to be paid, try the debt consolidation loan. The debt consolidation loan can help you to combine all your debts and liabilities into one single loan. This will also help you to consolidate your debts at a lower interest rate. You will feel less burdened as all your debts are modified and combined into a single manageable loan. But make sure that the interest you pay after consolidation is quite lower than before; else it would be of no use.

7. Try debt consolidation loan

7. Try debt consolidation loan

 

If you have many different kinds of loans and credits to be paid, try the debt consolidation loan. The debt consolidation loan can help you to combine all your debts and liabilities into one single loan. This will also help you to consolidate your debts at a lower interest rate. You will feel less burdened as all your debts are modified and combined into a single manageable loan. But make sure that the interest you pay after consolidation is quite lower than before; else it would be of no use.

6. Clear the most expensive debt first

6. Clear the most expensive debt first

 

Each of your debts will have different interest rates. As you would have categorized your debts in the first place, you will now know which one is eating away a huge part of your bank balance. The first one to be paid off is your debt with the highest interest rate as these would cost you more and make it difficult to pay back the rest. Next time you will be left with the minimum + interest you paid for the previous debt. So, clear them first. It is the best strategy if you wish to reduce your burden one by one and see some improvement in your account. Hence, start with the most expensive debt.

5. Find debt with lowest balance

6. Clear the most expensive debt first

 

Paying off all your debts at once may seem to be a huge process. It needs a lot of self motivation and confidence. The best way to gain it is to find the debt which has the lowest balance. Since it is quite low, it will be easy to pay it off. Now you will be one debt less. This will improve your confidence. Now move on to the next debt of highest interest rate with lowest balance. Once you are done, you can manage the rest by adding up the money you segregated for your previous debt. In this way, you can slowly get rid of your debts one after the other.

4. Plan a budget

4. Plan a budget

 

Till this date, you would not have bothered about your expenses nor created any plans regarding your expenditure. But it’s now time for you to face the “B” word. You may not like it, but why not give it a shot? Planning your budget and keeping track of your expenses and will help you in a great way as you will know where you are spending your money unnecessarily. Maintain a separate notebook or use any application or software to store all the details regarding your expenses under separate categories. This will also provide a better picture for you to reduce your lavishness and stay on track in order to pay off your debts in a more economic way and live a debt-free life.

3. Make emergency savings

3. Make emergency savings

 

It may be impossible for someone in debts to even think about savings. But it is actually very important for such people. You may even have a hard time in paying your minimum for all your debts but make sure you also save at least a meager fixed amount of money saved in a separate account. You may confront a very difficult situation and may be caught up in some kind of emergency. In those times you may not even have any option to take any more loans. So it is always essential to maintain a fixed amount of savings to come in hand in case of any kind of emergency.

2. Create new sources of income

2. Create new sources of income

 

Paying your debt with your current salary and bank balance may not be sufficient. You may have enough time after your day’s work at the office, do over time and get paid more. If you still have enough time left, try to make use of those leisure hours. Try to take up new jobs and make it an adventure. You may have your own potential hidden talents. Be creative!  You could be a great writer, teacher, baker, tailor, or anything else. Make use of this opportunity to try your hands in those. Do some part time jobs. It will make you feel happy and at the same time it will create a source of income to pay off your debt in a comfortable way.

1. Close the paid off – credit cards

1. Close the paid off - credit cards

 

Once you are done with one of your most expensive credit cards with the highest interest rates, get rid of them. Close them down as you do not want to repeat the blunder again. Month end payments of bills would only burden you as you would have spent most of your money in buying other things. So make sure to pay your bills as they come and not in the end of the month. If possible, try automatic bill payments. Make use of debit cards or cash as this will help you to spend from what you have rather than from what you can borrow. Lead a debt-free life by living with your own well earned money and don’t get tempted by the wonderful and colorful offers provided by various banks on those flashy credit cards.

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  • stranger

    The 7th and 8th paragraph are one and the same :/