Falling into debt traps is often so easy, you donít really realize until it happens. It starts with impulse buying, you then try to satisfy all your wants by living a luxurious life that is beyond your income. And before you know it, you are hooked into a chain of debts that you donít have clear plans of settling. Some people even go another mile of taking loans to pay loans. On this post you will find 10 easy ways that will put you on a path of Credit Card Debt Relief and help you pay off your credit card debts effectively.
- List Down all Your Debts and start by Settling the Ones with Highest Interest Rates
Paying off debts is not as easy as accumulating it. Therefore you have to be very smart to ensure that you pay off better than you accumulate. The first step towards this process is knowing exactly what you owe your creditors. Write down all your debts with each detail in fine print.† Arrange these debts in a descending order by principal.
On a second sheet, list the debts in a descending order by interest rates.
Start by settling the debts with the highest interests first because it turns out to be cheaper at the end. The high interest rates multiply fast so if youíre not careful your monthly payments may end up paying off the interest and not the actual debt. As a case study, if you buy a television set costing $1000 and a 20% interest charged on it monthly. After 12 months, the interest alone will be$4800 which is about five times the $1000 principal.
Settling down the debts with high interest rates first saves you a lot of money which you can channel towards the debts.
- Draw a Budget and Start Planning for your debt relief
Every successful project like building a mansion starts from a plan drawn on paper. Paying your debt needs a plan too. Draw a plan and stick to it. Find all your receipts and bank statements from the previous months. Scrutinize them thoroughly and determine exactly how much you spend on food, fuel, mortgage and other bills. If your expenses are beyond your income, try and regulate your expenditure by drawing a budget for what you need and eliminating what you want. Ensure your budget leaves some extra cash which you can channel towards paying your debt. You should strictly follow your budget with uttermost discipline for a positive outcome.
- Downsize Temporarily and Change Your Habits
You are trapped in this long chain of debts because of your habits and routine practices. Itís time to take a U-turn and turn away from some of your luxurious and flashy lifestyle, at least until you pay off all your debts. This is the time to downsize temporarily, itís not like you have a choice, you have to. Take a moment and scrutinize some of your habits that leads you to extravagance and wipe them off. Keep away from your drinking buddies and your circle of friends with whom you were splashing money with. After you have settled all your debt, you will have the luxury of choice, but until then, downsize temporarily.
- Pay Your Monthly Minimum Payments and Increase Payments on Them.
Inasmuch as you are settling the debts with highest interests first, ensure that you make the monthly minimum payments for the other debts to prevent extra charges. You also donít want your loan to spread over a long period of time, you can therefore increase payments on the minimum monthly payments. If you double the minimum monthly payment, you half the payment period and break free from debts fast.
- Avoid Using Credit Cards
You need to freeze your credit cards as you pay off your debtsóput them in a deep freezer! Credit cards promotes impulse buying, a major enticement toward falling into debts. Using cash to buy items that you need helps you to differentiate your needs from wants. It forces you to spend every cash with wisdom thus keeping you off extravagance. Quit using your credit card during this period and recover it later when you have stabilized financially.
- Find Other Sources of Income
High chances are that; you are in debt because your source of income could not match your expenses. Therefore, chances that you will pay off your debt with this same source of income are so slim. Find a side hustle to boost your income. Work extra hours in the office, work during the weekends and earn that extra cash. After work, freelance and work online for an alternative source of income. When you channel all these extra cash towards settling your debts, you will find it way too easy.
- Sell Some of Your Items and Properties
When the going gets tough and the debts are just way too much for you to settle with your income, consider selling some items and property. If the debt is not too much, you can sell some household items like clothes, electronics, cutlery and furniture that you no longer use. You can use online platforms, sell them to friends, colleagues or workmates. When the debt is relatively big, you may consider selling property like land, machinery or a house to facilitate the payment of the loan.
- Renegotiate the Terms of your loan with Your Creditors
When all your efforts towards paying the debt are not successful, talk to your creditors.† Let them know your situation and why you are not able to pay off your loan according to their terms. Ask them if they can reduce your interest rate, lengthen your payment period or both. This will make it easier for you to settle the debts.
- Break Your Savings Account and Pay Off the Debt
When all your limits of paying off your debts are exceeded, you can break your savings account and use it to pay off the debt. This seems like a very hard blow to your financial stability but it is worth it. You may consider starting another savings account whenever you get back on your feet financially.
- Save For Emergencies
Not everyone is indebted because of extravagance, impulse buying or trying to live a luxurious life. Some people had to take debts to settle emergencies when a relative fell sick, a car broke down or other forms of emergencies. If you have an emergency account, you will not be worried about having to borrow money to tend to your emergencies.
We hope you found this piece informative, for answers to questions on paying off debts or more information on the same, please feel free to get in touch with us.