Debt is one thing in life that you can do without. Nobody wants to live in debt, no matter their lifestyle. But at the end of the day, we are all humans and make mistakes. The result of those mistakes is that we end up becoming stuck in it, and sometimes with lots of it.
Should you end up in debt for whatever reason, it is understandable that you are frustrated and worried. It’s probably one of the most stressful things you can ever come across in life. And the one question you will be wondering when that happens is, “how to pay off your debt fast?”.
In simple words, to wonder how to pay off your debt fast when stuck with it is just something to be expected.
As hard as it may be to deal with it, rest assured that there is a way out of the debt trap if you want it. So if you are wondering how to pay off your debt fast, rest assured that there are plenty of options to choose from.
To reduce your debts, you have to cut in the right places! While there are many ways you can navigate through the debt trap, given in the steps below are some of the most important.
Set up an emergency fund
To avoid unpleasant surprises that could divert you from your goal, put some money aside for a specified period (Generally 4-6 months).
Aim for zero debt
One of the first things you will need to aim for is the magical number zero.
Zero is the perfect target to aim for, as it is the point where your finances are at a neutral level. It is not the absence of wealth, but rather the absence of both wealth as well as debt. Aim for the magical digit of zero debt, as your financial goal. This is the most important thing you will need to learn if you are wondering how to pay off your debt fast.
Stop using your credit cards
Put them aside, put them away, don’t use them again until you get back on track.
Figure out how much you owe, including interest
Calculate the total amount you owe to your creditors. This calculation will need to take into account your principle amount, interest as well as potential increases due to other factors such as inflation, compound interest, etc.
Doing this will give you a rough idea about how much money you will need to earn to get out of debt. If you are wondering how to pay off your debt fast, this is one step that you cannot ignore.
Estimate your earning potential as well as if you can increase it
Once you can figure out how much money you owe, start estimating the total amount you earn. This should take into consideration your total amount after-tax, for your tax payments are not yours, to begin with. You don’t pay them either to a considerable extent; your employer pays it for you.
You can work all you want on the answer for how to pay off your debt fast, but if you don’t include this, you won’t be able to make any progress. It is a great way to know what your repayment potential is, and the total amount it must be increased by to repay your debts.
Pay your debts as much as you can
Even if it’s only a few dollars, the more you pay, the faster your debts will go down.
Cut back on day-to-day expenses, Instead of stopping for your favorite coffee at a restaurant every morning, make it at home and bring it with you. On your lunch hour, bring your lunch. At the grocery store, buy the house brand. Little things that will add up big quicker than you think.
You can also use a surprise cash inflow to pay off your debts: Are you getting a tax refund? Use it to pay off your debts.
Get rid of high-interest debts first
Even if it’s the largest amount, go gradually, paying more than the minimum balance. If you have several loans on hand right now, create a priority list. Not all loans demand immediate payment. On the contrary, some can be delayed for a while.
This is not to say that you should procrastinate on your debts. It is about prioritizing your loan repayment plan.
Figure out which loans are the most urgent and start by paying them off first. This is a great strategy when it comes to figuring out how to pay off your debt fast.
Don’t sacrifice the thing you love the most
Reducing debt requires a change in lifestyle, but it doesn’t have to be boring. Treat yourself well once a month if your finances permit.
How to pay off debt with low income
Try changing your job
If you find that you have a cash shortfall, you might want to change your jobs. Given that most jobs will increase your pay on an annual or half-yearly basis, you will have to wait for a very long time to increase your income.
Changing your job is a faster way to earn more money. Alternatively, you could apply for a promotion and increase your earnings in that manner. You don’t have to go for this if you are wondering how to pay off your debt fast. But it is one of the most effective ways of getting out of debt fast, especially when you have massive amounts to be repaid.
Start a side business
Starting a side business is a great way to earn more money.
You can only earn so much with a job. Beyond a certain point, however, your earning potential will drop to nothing.
This is where businesses can be of help. If you can start a business of your own, you will be able to significantly increase your earning potential, which can sometimes be multiple times that of your monthly salary.
Starting a business is a good answer to the question, how to pay off your debt fast. This is in a way related to the previous point, as both refer to a way in which you can increase the total amount of money you make at the end of the day.
Refinance your debt
A great way to reduce your loan amount burden is to have the loan refinanced.
There are plenty of companies that offer loan refinancing at attractive interest rates. This will often include a consolidation of the loans as well, into a single loan.
Figure out a good loan refinancing company and start working with them on fixing your debt problem. You cannot deal with the question of how to pay off your debt fast if you aren’t willing to refinance your debt. It is just not possible at times to pay back the enormous amounts of money that you owe to banks, given the accumulated interest and maybe even penalties.
File for bankruptcy
Last but not least, is filing for bankruptcy. It’s one answer to the question, how to pay off your debt fast that you should try not to implement.
To file for bankruptcy is to be cleared of all loans in a few short moments. At the same time, however, you cannot file for bankruptcy, except under particular conditions. These include conditions such as bad health, lack of a job or business revenue, etc.
It’s to be considered as a last resort, for there are consequences for filing bankruptcy. Among these are bad credit scores, difficulty in getting future loans.
Check what’s in your credit report
To have control over your credit and your financial life, you must check your credit score regularly.
As a whole, the strategies are all great answers to the question, how to pay off your debt fast. Furthermore, the steps mentioned above are not in any way to be considered as a quick fix. On the contrary, they are but a way of life that you will need to implement and turn into a habit.
In other words, it is only when you apply these principles consistently that you will be able to get out of debt. Just hang in there, work hard, and endure. You will be out of the mess sooner than you expect. It’s the decisions you make today that will help you get out of debt and into a debt-free future!
TIP: If you want results and you want to pay off your debts quickly, print this page and post it where you can read and re-read it daily