Are you currently buried in debts? Looking for ways to get out of the loop that’s been straining your pockets? Don’t worry, we’ve got your back!
Getting out of debt sounds simple but the truth is, it’s easier said than done. A lot of people are losing their assets because of the debts they can’t pay. Some believe that the best way to get out of the loop is to make another loan and use the money to pay for the existing ones. This assumption can only make your life worse. Forget about using another loan to pay for your previous obligations. What you need to do is to follow this quick plan.
1) Pay on time.
First, you need a change. One major reason why you are buried in debt is that you are not paying properly. You need to change your payment habits by paying on time. This will help you reduce the interest you are paying on top of the principal loan. Pay on time to avoid extra penalties and charges that are way more expensive than the original amount of your loan.
2) Pay your existing debts gradually
If you don’t have the financial capacity to pay for all your debts yet, try to pay them slowly. Increase your monthly amortization to reduce the amount of principal and interest you are going to pay in the next months. Don’t skip a month! A part of paying your existing debts gradually is to pay them regularly.
3) Fully pay your existing debts.
Have you saved enough money? Then this is not the time for travel. Use your savings to fully pay your existing debts first. In this way, you can get rid of what’s troubling you lately. If you have the financial means to pay for everything, don’t hesitate to do it. You have to save yourself from paying monthly interests and amortization if you have other financial plans in the future. This is the easiest and the quickest way to get out of debt.
4) Close your credit cards.
Credit cards are the main source of debt. Applying for a card is very easy than applying for it. Banks approve your applications immediately because they want you to get a loan. They want to earn from the interest you have to pay later on. If you are a big spender, credit cards are not for you. So, to get out of your debt quickly, close all your credit cards. If you can’t cut them all, try to leave one or two cards open. You don’t need 5!
5) Set a budget for your expenses.
You are probably worried about paying your debts right now since your income is not sufficient to cover all your bills. If there is no enough income, you need to adjust your expenses. This is going to help you avoid getting loans every time you are short of your budget. To do that, remove all unnecessary expenses. Prioritize your utility bills, monthly debt payment, and basic necessities. Close the monthly subscriptions you have if you think you can live without them. Always set a budget for your expenses so you will have something to spend on miscellaneous.
6) Save money.
While paying your current loans and spending just enough for your expenses, it won’t hurt you to save. Set aside a small portion of your income and put it in your savings account. Even with little savings every month, you can still accumulate enough money to pay for your loans next time. Savings will also save you from stressing yourself out every time you exhaust your income. Imagine the relief of having money in your bank account. You won’t think of getting another loan again if you have savings.
7) Do not get another loan.
Finally, forget the assumption that getting another loan can get you out of debt. You are only adding weight to what you are currently experiencing. Using a new loan to pay for another is not going to work especially if you have a poor credit history. You won’t get out of the loop if you will keep on attaching yourself to money sharks and financial institutions. What you need to do is to get rid of them, not enter into another contract that will not help you move forward.