How to Speed Up Debt Repayment
We can all agree that $90,460 is a significant figure. But do you know what those numbers mean? Well, that is the amount of debt the average American has, according to a 2021 CNBC report.
The debts include credit cards, consumer debt products, student loans, personal loans, and mortgages.
If you are lucky, you are not contributing to these statistics. However, for as many people who are a part of the statistics, they have to fix their debt portfolio, no matter how small.
In this article, we will show you how to speed up debt repayment with clear, workable solutions.
Get Clarity of Your Finances
Grab a pen and paper and get ready for some honesty. First, make a list of all your total incomes, considering all the sources of income you have.
The next step is to do the same for all your expenses. When we say all, we mean all. Yes, that includes that cup of coffee you stop to pick up on your way to work every day. Do the same for loan balances, which should fall in the obligatory expenses column.
At this point, you may realize challenges in remembering what you spent money on. To avoid this going forward, sign up to Chunk Finance. The platform will make it easy to get better control of your finances.
Every time money goes out of your account, you get a notification. Visual presentation of your expenditure with graphs and charts makes it easy to track your spending. Best of all, the experts give you advice on debt pay-down strategies.
With an overview of your finances, it can be easy to set up a budget. At the top of the list should be obligatory expenses. Focus on the needs and try to minimize the wants. You should also put aside something small for some of the things you like.
The best way not to stick to a budget is to be too rigid. You work for the money, so reward yourself a little. Note, the last part please, a little. You will understand why in our workable point number two.
Look For Sources of Extra Cash
Tighten your belt for this part because it can be difficult. Sources of extra cash can come from cutting out some of your expenditure. You know we are going back to that cup of delicious caffeine pleasure you so enjoy, right? Well, no more stopping at the coffee shop; make your own at home.
The same goes for your favorite lunch spot at that restaurant that serves delicious meals. The internet has the same recipes, so get cooking.
At this point, it should be pretty clear where we are going. But in case it isn't, allow us to word it like this. No more frivolous spending for things you can do for yourself.
And, stop swiping that credit card at every opportunity. Shop with cash or your debit card. That way, it limits your spending to the money you have.
Do you want to know how much you can save? Here is what you should do. Go to the metal shop and ask them to make you a piggy bank. No, don’t buy one from the shops. We want one that you can’t pry open easily.
Now, put the equivalent of what you would spend on unnecessary items into the box. So, the $10 you spend on coffee every week goes in, and so on. Give yourself about six months to do this.
At the end of the period, go back to the metal shop and ask them to open it for you. Please come back here and let us know how much you saved.
Use the Right Strategies to Repay Debts
Do you want to master the trick of paying off debt fast? Simple, have the right strategies. Let's look at some of them.
Debt Snowball Method
Debt snowball methods provide a solution on how to pay off debt fast with low income. List down your loan balances from highest to lowest.
Next, allocate a minimum amount to each of them. Now, start by clearing the lowest amount fast. Any extra cash, like what you saved in step 2 above, goes into clearing these balances.
Once you finish the lowest, move on to the second-lowest amount. Roll over the amount you were paying to increase the amount that goes into settling the second-lowest amount. Maintain the same rollover until you get to the highest loan balance.
The debt snowball method is fantastic for its motivational factor. It feels good to tick off loan amounts from the list, no matter how small.
Avalanche Debt Repayment Method
The avalanche debt repayment method is the opposite of debt snowball. Start with the highest amount and then move on to the lowest? It provides a fantastic way to clear high loan amounts fast.
You also get the advantage of taking care of the high-interest rates that come with the high balances. It does require a lot of dedication and commitment, though.
Zero Interest Balance Transfer
A zero-interest balance transfer is the best way to pay off credit card debt. Some credit card issuers give a 0% introductory rate for new cards.
You can transfer high-interest credit card balances to such. The credit card issuers can give windows of up to 18 months, during which they do not charge interest.
Debt consolidation
Debt consolidation means bringing all the loan balances together. You then take one loan, usually with better interest rates, to clear them.
Debt Renegotiation or Refinancing
Some lenders will be willing to listen if you want to renegotiate some loan terms. Remember, they want their money back. Anything that can help them to achieve this will be a welcome solution. Put on your negotiating hat and present your case to them.
It can give you more flexibility and leeway with managing some of the debts. Under debt restructuring, you can alter existing debt. It could be in the form of extending the terms or delaying interest payments.
Debt refinancing is another option if renegotiation fails. In this case, you replace the existing loan with another that has more favorable terms or conditions.
Final Thoughts
Speeding up debt repayment means better management of your finances. We have shown you how in our points 1 and 2 above.
The next part is to adopt the right repayment strategy, as we have said in the third point. Choose the one that will work best for you, and then learn a little bit more about it. With discipline and dedication, unmanageable debt may be a thing of the past.
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