8 Effective Strategies to Achieve a Debt-Free Life.. Learn About Them
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| “Indispensable” Tips and Strategies Before and After Borrowing |
Paying off debt is no easy task, but taking a strategic approach—or even more so—can speed up the process.
You may need to make some temporary lifestyle changes, or you may not need to. That’s because most of the advice below is about identifying and using your available resources rather than spreading them around.
The best way to pay off your debt depends on your situation. Think about what works best for you and consider more ways to pay off debt quickly.
1. Equity in your home to pay off debt:
If you have equity in your home, you’ll likely be able to pay off your debt faster by taking advantage of it. That’s because interest rates on a home loan tend to be much lower than credit cards (and personal loans).
It can take more than 1 month to get approved for a loan based on the value of your home, and you could lose it if you don’t pay it off in installments because the collateral for the loan is your home.
Home Equity Loans or HELOCs: Home equity lines of credit for home equity loans and HELOCs give you access to the equity you have in your home that you can use to consolidate debt. However, there are closing costs that can be quite expensive, and the application process can take more than 1 month.
Cash-out refinancing: This involves replacing your existing mortgage with a new one for an amount greater than what you owe and taking the difference in cash to pay off your debt. While you can save a lot of money by swapping other debt for credit card or mortgage debt, you can also refinance the new ones, which usually only makes sense if you have closing costs and can get a lower rate than your current mortgage.
Selling Your Home: The benefits of selling your home for cash are obvious—you’ll (hopefully) get a large sum of money that you can put toward paying off your debt. But the biggest drawback is that if you sell your primary residence, you’ll need to find a new place to live (and if you sell your primary residence, you’ll need to find a new place to live).
2. Liquidate Assets:
Selling unused or unwanted items is an easy way to raise quick cash. And if you’re in a hurry to pay off your debts, a little extra cash can be very helpful.
You can make a lot of money by selling a few high-value items or a lot of low-value items. When it comes to high-value items, think jewelry, electronics, and designer clothing. Even if you don’t have a high-value item to sell, you can make money by selling clothing and household items from more modern sites like Facebook Marketplace, Poshmark, and Craigslist through traditional garage sales or the equivalent
3. Cancel or Downgrade Subscriptions:
Many people have subscriptions that they don’t know about, have forgotten about, or no longer need. For example, if you sign up for a free trial of a streaming service to watch 1 show, you’ll still be paying for it in a few months. Instead of siphoning that money away every month, take that money and use it to pay off your debt.
Check your bank statements and scan for forgotten or ignored subscriptions. Cancel the subscription you don’t want and redirect the money to your debt. If you don’t have a subscription you want to get rid of, consider downgrading to save some money.
4. Cut back on spending:
Analyze your expenses as a whole while checking your bank statements for unwanted subscriptions. There are probably several categories of expenses you can cut back on to pay off your debt faster.
Here are some ideas:
Cancel food delivery and pick up your meals yourself.
Have a habit of cooking dinner at home.
Take one to three months off from buying new clothes and shopping at thrift stores.
Make coffee at home or make coffee more often (if you buy 3-5 cups of coffee a week, that means you can save about $50 a month, not to mention tips).
Invite friends over instead of going out.
While making these lifestyle changes can help you pay off your debt faster, don’t be tempted to cut out all the fun in your life. Rewarding yourself along your debt recovery journey is just as important as sticking to your plan.
5. Shop insurance deals:
Reducing discretionary spending is great, but don’t forget to check your bills, too. 1. One of the most important costs to watch out for is insurance. Choosing an insurance policy without comparing different insurance companies can cost you a lot of money. Or if your credit score has improved since you took out a policy, you may qualify for a much better rate.
The insurance coverage rate criteria that different insurance companies use vary. You may qualify for a rate with insurance company A, but you may be able to get a lower rate with insurance company B. Save money whenever you want by switching policies or insurance companies toward paying off your debt, and redirecting those savings.
6. Pay off debt strategically:
Paying off debt without a strategy may work after all, but it’s not the fastest way to get out of debt. With strategies like the debt snowball and debt avalanche, you can speed up your debt repayment while keeping you motivated.
Debt snowball: The debt snowball method involves paying off your debts according to their balance—from smallest to largest—with the smallest payments remaining. This method works best for those who need extra motivation and can benefit from winning early.
Debt Avalanche: The debt avalanche method involves paying off your debts according to interest rates—highest to lowest. Of course, you can still make the minimum payments on each monthly balance. This method is more efficient than the debt snowball method, but it may take longer to pay off that initial balance.
Choose a strategy that works for you and stick to it. The faster you can stick to your payback plan, the better your chances of continued progress.
7. Make More Money:
Cutting costs and negotiating your debt are great ways to pay off your debt faster, but don’t ignore your ability to make more money. There are countless ways to make more each month, depending on your situation, and even a small increase in your income can speed up the process of paying off debt.
Here are some ways to bring in a little extra cash:
Start a side business: With a little extra time, you can sell a product or service outside of your full-time job. For example, you could walk dogs, sell handmade jewelry, or work as a virtual assistant.
Take a gig: You don’t have to start a business to make extra money. There are plenty of companies — like Uber, or Rover — that let you work whenever you want.
Get a roommate: Do you have an extra room in your house or apartment? If you’re willing to share your space, you can easily make a few hundred extra dollars each month.
8. Use a Bonus or Tax Refund:
Bonuses or windfalls are never a bad thing — but it can be hard to decide what to do with them. Help yourself by setting aside any future bonuses to pay off debt.
Tips:
If you don’t like the idea of dedicating all of your rewards to paying off your debt, that’s okay. Determine what percentage you can stick to spending and paying off your debt. For example, you could allocate 75% of any reward to paying off your debt, but spend the other 25%.
Instructions:
How can I pay my debt with collection?
After you have confirmed that the debt is yours, choose a reasonable recovery plan. If you cannot pay your debt in full, propose a plan that you can manage. Pay monthly or you can discuss the total amount of the recovery.
Write it down after you have agreed to a payment plan with debt collection. If you have problems with debt collectors during the transaction, you can file a complaint with the Consumer Financial Protection Bureau.
How to get extra money to pay off debt?
There are countless ways to make extra money, but the method that works for you depends on your skills, experience, and availability.
You can start a side business selling goods and services, play a temporary role, or rent out a room in your house. You can also ask for a raise based on your job at work.
What debt should I pay first?
It depends on your goals and motivation. If you are one of those people who need a quick win to stay motivated, use the debt snowball method and pay off the debt with the lowest balance first.
Paying Off Debts If you're just focused on paying off your debts as efficiently as possible, use the debt collection method. This means paying off the debt with the highest interest rate first.
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