It’s easy to feel overwhelmed by debt, especially if it’s spread out across several accounts or loans. There are a few simple tactics you can use to get out of debt.
There are a variety of reasons as to why you might need to take out a personal loan -unforeseen expenses, job loss, emergencies and more.
Whatever your reason may be for taking out a personal loan, know that you are not alone. Hundreds of individuals are on the same boat in Mississippi.
According to a study published by The Pew Research Center, 80% of Americans have debt. So whether you owe money as a result of an unanticipated emergency or unintentional extravagance, there’s no need to be embarrassed.
However, to avoid paying high interest rates, late charges, and falling behind on payments, it’s a good idea to understand how to get out of debt and develop an actionable strategy for achieving your objectives.
It may appear to be a daunting task, but it’s critical to grasp the full amount of debt you owe. Having an accurate knowledge of the figures will enable you to establish a repayment strategy that works. This can be as simple as tracking your expenses using an app, making notes in a diary or using an app to help you track your expenses.
After you have jotted down the total amount you owe, it is a good idea to make a note of the due date of your payment, amount of your payment and the interest rate. These details will help you manage your finances accordingly so you don’t fall behind on payments.
In debt management there are two ways you can go about tackling your debt.
The Snowball method is when you tackle your smallest debts first while maintaining minimum payments for the larger debts, meaning you prioritize the debt with the smallest amount and this in return will motivate you to stay on track because you can see quick results for each payment and it will decrease your overall debt amount.
The Avalanche method focuses on paying off the debt with the highest interest rate first and then making minimum monthly payments on all other debts. Consumers then pay attention to the debt having the second-highest interest rate and repeat the procedure until all liabilities are paid off.
When choosing a strategy you must pick the one that motivates you most so that you can keep up with your payments. Finance experts tend to advise on choosing The Avalanche Method to tackle debt, however a research conducted in America shows that the small victories and sense of achievement that comes from The Snowball Method has helped people clear their debts faster. The ideal thing to do is coming up with a plan that supports you and motivates you. The end goal is to consistently keep on top of your payments so that you can clear the amount owed faster.
Now that you have taken the time to come up with a plan to tackle your loan payments and debt, the next priority would be to focus on your spending habits.
Paying debt requires a bit of discipline and self restraint. You must develop a budget plan for yourself and prioritize your loan and debt payments. If you need some help with creating a budget plan, here is an article we wrote to provide you with some guidance. Debt can hold you back from enjoying your life for long periods of time but if you can prioritize your loan payments and stick to the plan you made for yourself, you can pay off the loan faster. Adjusting your spending habits here and there can make a huge difference in your monthly cash flow. Small steps like taking public transit instead of Uber can help you eliminate extra expenditure.
Whether you have paid off your first $500 off the loan or you stopped yourself from ordering out another day in the month, you must celebrate these positive changes with little treats for yourself. A good way to stay on track and to motivate you is to set small milestones for yourself, for example if you have managed to consistently make 5 payments on time you can treat yourself to your favourite take out restaurant. This way you will look forward to staying on track, hitting your milestones and you will be able to pay off your loan and debts earlier.
We hope this article was helpful and informative. The ultimate end goal for you is to pay off your loan faster but you must celebrate the small wins along the way. Paying off debt can be overwhelming but the journey is important, devise a plan that is achievable and one that will set you up for success. Remain consistent and be patient with the process.