With more than half of the American people spending more than they earn monthly, no wonder the nation is reckoning with a loan debt crisis. Thus, resulted in financial broke. If you want to know the reasons why you are broke and how to cope up with this problem, visit Daily Prosper for more information.
As people reach for credit to bridge the gap in their income, you’ll find that personal debt has ballooned over the last decade. Thankfully, with the help of the rising popularity of personal finance strategies, many people have started looking at their personal finances more healthily.
But, if that’s not you, no worries. We’ve got you covered. Keep on reading for our top five tips that will put you on the right path, and help you get rid of your loan debt faster than you could imagine.
1. Tackling Loan Debt 101: Pay More Than the Minimum Payment
There’s a high possibility that you’re dealing with a not-insignificant amount of credit card debt. The problem with these forms of debt is the high rates of APR, ranging from 15% up to 24%.
These rates lead to solid monthly payments that are problematic to carry around in the long run. This is even worse when it comes to credit cards that you keep using regardless of the overarching debt amount.
The first step you need to take to speed up your payoff process is to set automatic payments that are higher than your minimum monthly payments. It might not seem like it’s doing much, to begin with, but as time goes by you’ll be carving bits and pieces of your principal amount – as well as your interest payments.
2. Implement the Debt Snowball Method
We prefer thinking that we can mathematically figure out the perfect way out of debt. However, the truth is, we’re more emotional about our money than we like to admit.
This is where the debt snowball method comes into play. It helps you build momentum and raise your spirits as you go on paying off your debts.
This method asks for listing all of your debts, and sort them from the smallest amount to the largest.
Once you take a look at your smallest debt amount, you’ll want to through all of the excess funds you have on hand to get rid of it. Yet, you’ll want to ensure that you’re paying (at least) the minimum amounts for your other debts.
It’ll help you get to cross out the smallest debt you have on hand. This will give you the needed confidence to go ahead and tackle your next smallest debt until that one is also paid off.
What’s great about this strategy is freeing up more funds that you can pay off towards your larger loans, all without any extra effort on your part. In addition, you’ll be enjoying yourself and the “wins” you’re getting, which helps you “snowball” your payments towards your remaining debts.
Once you have your final debt remaining, you’ll be able to send all your extra money towards that one goal. It’s a simple and enjoyable way to reaching your debt-free goals.
3. Follow a Bare-Bones Budget
Now that you’ve set two concrete strategies to eliminate your debt, you’ll want to ensure that you’re not making the same mistakes that lead you to uncontrollable debt in the first place.
You’ll want to take an honest look at your expenses and how you spend your money. If you don’t have a budget on hand, you can start fresh by listing all of the monthly essentials.
We’re talking about critical payments, like your food and rent budgets. Make sure you’re eliminating any “extras” or “luxury” categories like long trips or dining out. Of course, keep in mind that a bare-bones budget for you might look quite different from another’s.
Just write down all the different categories that you feel are non-essential to your monthly living, and put them on pause until you reach a specific loan payments goal.
For example, you might say that you’ll follow your bare-bones budget for three months, or however long it’ll take you to get rid of your first debt account.
4. Get a Debt to Remove a Debt
This might sound a bit counterintuitive. But, you might have reached the point where you’re doing everything you can to pay off your debts.
But, the interest rates are really messing with your payment plans, you can always get a debt to consolidate your debts into a single account. This account will have an affordable monthly payment and you won’t have to worry about any other payments.
For example, you might be stuck with paying insanely high fees if you’re dealing with multiple payday loans at once. In this case, you can get professional payday loan help to shift the interest rates a bit in your favor, instead of the other way around.
5. Sell Unwanted or Unneeded Items
Many people are unaware of the actual worth of the items they have laying around, doing nothing but collecting dust.
If you’re looking for a quick way to get some cash, you should always look at your belongings first. Take stock of the items that you haven’t used for 12 months. Chances are high that you have no future use for them, so selling them will actually give you some profit.
Whether you’re more of an online selling fan or you’d prefer setting up a garage sale, just give yourself a timeline for the “selling day.” This way, you won’t get to overthink whether you want to hold on to old items or not.
Defeating the Loan Debt Monster
The whole psychological pitfall of dealing with your loan debt is starting. Or rather, it’s actually pulling your head out of the sand and looking at your debt accounts.
Hopefully, our article has shed some light on the main five tips that can help you tackle your debt and remove that cloud from hanging over your head.
Just remember to start small, so that you can create new financial habits that will serve you well for the rest of your life.
If you enjoyed our explainer, you can check out additional tips and tricks, all available to you, in our finance section.
