How to get out of debt ASAP

Here are the five tips that will help you to get out debt and mistakes that you should not commit in this process.

The saving and the consumption patter of Indians are changing. While a few years ago, people saved money for big ticket purchases, now-a-days people would opt for a loan rather than saving for it for months. The EMI culture and instant personal loans has made it affordable for many people to get a loan in two minutes.

But staying in debt may not be a healthy for your financially life. The situation is likely to aggravate under unforeseen emergencies such as job loss.

So, if you want to get out of debt as soon as possible, here are the top four ways to get out of debt ASAP.

Pay more than the minimum EMI:

One of the quickest and easiest ways to get out of debt is to pay more than the minimum EMI. This will not only help you to decrease your loan tenure, you can also save on the interest. However, you need to check that the institution will not charge prepayment charges. Make an excel to track your progress as well stay motivated.

Start with the smallest loan:

The second way to get out of debt would be to focus on the debt that will be the easiest pay off. Although, technically speaking, you should start with the debt that attracts the highest interest rate but human nature and technical knowledge are two sides of the same coin. When you pay the minimum amount for loans and focus on repaying the smallest debt, it instils a sense of can do attitude and keeps you motivated on this journey. Just like we stay motivated to lose weight, if we see some difference in the first few weeks, repaying debt is similar. Once you see the proof of your loan getting off your shoulders, you believe that you are on the right track and it motivates to continue with the process. 

Make a minimal budget:

Sticking to the budget is one of the most important habits that will get you out of debt. If you want to be debt free, then you have to cut down unnecessary expenses. This could include eating out, going to the movies etc. The extra money should be used towards repaying your debts. You don’t need to stress about not being able to enjoy these things as it is just for a few months. You can go back to your old budget when you are debt free.

Sell things that you don’t need: We have so many things that we don’t need but hoard it because we have emotional attachments towards certain things. Whether it is clothes, appliances and gym instruments that we never used. It is lying on our house eating space. You can sell the things that you don’t need on various websites that deal with second hand clothes and appliances. You can use this money towards paying off your debt. 

Consider a balance transfer

Today there are many opportunities through which you can transfer your balance to an account with low interest rates. Balancing transfer is specially beneficial if you have a mountain of credit card debt. You can shift your balance to another credit card. With the help of balance transfer, the first credit card debt is paid off. The debt will reflect in the other credit card. If the other credit card offers lesser interest rate, you end up saving interest on the former one.

 Paying off your debt can be overwhelming at times. This is why many of us make a few mistakes in this process. Some of these are:

1. People try to pay off multiple debts at one time. It can lead to confusion and hence the better way would be to start on the smallest debt.
2. Our credit score depends on the limit of credit that is available to us. Hence, it won’t be a good idea to close your credit cards after paying your credit card debt.
3. While it is recommended that you channelize all the resources towards paying off debt, you should stop contributing towards your retirement account.

Paying off debt can take some time and hard word but it is all worth it in the end. 

Tags: debt, loan