Debt is a burden, like an anchor weighting you down. To get out of debt can be difficult and you may be wondering how to do it. Borrowing money is normal but too much debt can get expensive, stressful and damage your credit score. When borrowing money you need to try and have a plan of how to pay it back within the timeframe of the loan. If not, interest rates over a period of time can start to add up and make the loan a burden. We have picked 10 vital ways to help you kick debt once and for all.
10] Collect all the information
Gather all the debts you owe and write down how much owe, who you owe it to and the interest rates associated with the loan. Bring together all those recent bill statements for all credit cards and loans and tally up the total. Do not worry about the total figure, you just need to know where you stand. Once you have the figures and interest rates you can start working out how to pay it off and roughly how long it can take.
9] Income vs Expenditure
You then need to start looking at your income each month and what you spend each month (expenditure). See how much you have left over by taking away your expenditure from your income. This is the figure you have to work with. You can try to split this figure between the different debts you owe. When it comes to expenditure try to cut out things that you do not really need. Any subscription services can add up over the months, so if you do not need them cut them out. When trying to pay off debt you need to make sacrifices in the short term for long term betterment. Think of how happy you will be once all that debt has gone.
8] Inform lenders
Call you lenders and tell them you are having problems paying off the loan. This way they can try and help you with a payment plan or freeze/cut your interest rates. Avoiding lenders when you face financial difficulties can make the situation worse. Some lenders do try and help, so try and tell them your situation.
7] Prioritise Debt
Now prioritise all the debt. Which is the most important to be paid off, like the debt with the highest interest. You will have high priority debts like mortgage, bills and more. Not paying these can have unwelcome repercussions. Look at all your loans, then make an ordered list of all loans, starting with those that will cost you the most over your term. Then figure out how you can pay those costly loans back first and if possible the quickest. This way you can get rid of the most expensive loans, hopefully saving you some money to pay off those smaller loans quicker later on.
6] Lower Interest rates
Try to move your debt around to different credit card providers or banks with lower interest rates to reduce your overall debt. Look for credit cards with a 0% interest deal. If all else fails you can get another loan out with a cheaper interest rate to pay off the loan with a higher interest rate. Try to work out whether it’s cheaper to use new borrowing rather than just continuing to repay your loan.
You need to start creating a budget. See what money you have and where it really needs to go. This way you know exactly what you need to do with your money each month and it can help you stop impulsive buying and spending unnecessarily. Keep a close eye on your budget and if you get more money coming in at the end of the month, instead of spending it, look at what loan needs it the most and allocate it there. Your first priority should be breaking the shackles of debt.
4] Earn more money
You can try to start a side hustle to earn some extra money on the side to help get out of debt. This may take a small amount of initial income but the potential returns could be huge. You could sell things on eBay or Amazon, start a blog or sell your skills. We will put some links below this paragraph for some tips.
Always look to save money on bills, like your utility bills to make sure you’re getting the cheapest deal. According to the Department of Energy, the average person could save around £200 just by switching energy supplier. Look at your mortgage provider and switch to lower interest rates if you can. Try to get cheaper deals on your broadband provider, tv package provider and anywhere else you can. Use comparison sites to look for cheaper deals, or use them to check the price of your current package. If you find a cheaper price call providers to see if they can switch you to it.
3] Credit Cards
One of the first steps to getting out of debt is to stop getting into more debt each month. One way is to stop using your credit cards each month. Sometimes you may need them to cover monthly shortfalls, so look for 0% interest cards, but try to minimise their use. Try to cut out credit cards altogether if you can.
When paying off debt use all the money you have as the debt can cost you more in the long run than you paying it off now. You will save more money in the long run that you could use later on. The interest charged on borrowing will probably outweigh the interest you earn on your savings account. If you save money on bills here and there, put it all towards paying off the debt.
None of this will work if there is no discipline. If you spend extra money you earn each month or money you save on bills on the things you like, then the debt will still be there and growing. This will make matters worse for you later on down the road. You need to stick to your budget, put that extra money toward the debts, make sacrifices and more. Getting out of debt is not easy, that should be know. So try and make budgets and gain money control, it will be beneficial for you and your money in the long run.