5 Proven Ways To Wipe Out Debt Fast
Debt is the sum of money loaned or borrowed by one individual or party to another. Individuals who can’t afford to purchase items in large amount such as house and car often rely on bank loans and similar methods. There are certain arrangements done in order for the borrower to acquire money like installment plans such that the borrower pays a monthly amortization with interest at a certain period of time. It could be 5 years or longer. It is important to understand the interest rates and taxes in order to pay your debts effectively and be debt-free in a shorter period of time. You also need to know how to control your finances to avoid more unwanted debts in the future.
- List all your debts and arrange them from the highest to lowest interest.
The first step to be debt free fast is to list all your debts and arrange them from the highest to lowest interest. This allows you to allocate your money wisely and prioritize debts that earn high interest. Do not neglect high-interest debts for it accumulate huge sum of money and before you know it, your debt is twice as much as the principal amount. Allot a certain percentage of your monthly salary to pay all your debts. Make sure to pay your debts on a monthly basis before they become out of control.
- If you can’t pay the whole amount, at least pay the minimum.
From your list of debts, indicate the principal and the minimum amount to be paid on a monthly basis. This should be paid religiously in order to slowly get rid of them together with the debt with the highest interest. Also indicate the payment due dates so you won’t miss out on them and avoid additional charges such as late payment charges.
- Use all your extra cash to pay your debt with the highest interest rate.
Knowing the fact the money going out of your pocket is higher than the one you can save, it is just wise to use your extra cash to pay the debt with the highest interest rate. You will only be able to save the desired amount from your monthly salary once you settled all your debts.
- Repeat steps 1 to 3 until you’re out of debt.
Maintaining self-discipline will help you get out of debt fast. If you adhere to your plan to pay a portion of your debts monthly, then you are in the right path of being debt-free. During this period, avoid necessary purchases unless you can instantly pay them in cash. Think before you spend. Is it really necessary? If not, then don’t buy.
- Never borrow money to pay for your debts.
The worst thing you can do is to loan money from people to pay for your existing debts. This will only continue the cycle and won’t let you get rid of your debts fast. If you need extra cash, you can look for part-time jobs that would add up to your budget. Never ever borrow money because it will only add up to your debts.