When you’re in debt, you’re bound by its shackles. It’s stressful, and a situation that no-one wants to be in. However it happens to a huge proportion of us at some point or another. Car finance, student loans, credit cards and payday loans can all add up, and before you know it you’re swimming in debt. Regardless of how it happened, if you’ve reached a turning point and want to become debt free, here are a few tips for getting on the right path.
Cut up your cards
To get out of debt- first of all, you have to stop spending. If you’re in a cycle of paying some money off your credit cards and then spending back onto them, the first step is to cut them up. If you’re relying on this money for essential things such as food and bills, it’s time to adjust your spending. Make some cutbacks and reorganize where your money is going each month. If you can’t afford to live without using credit and spending onto cards, it’s time to move on to the next step.
Speak to your creditors
If you’re no longer able to afford your original credit repayments, don’t just bury your head in the sand. Talk to your creditors, and see if you can arrange a different payment plan which suits you both. Admittedly it will take you longer to repay the money. However when you’re paying back an amount you can afford, you’re less likely to end up missing payments. Missed payments can lead to further charges and debt spiraling even more. If you are already dealing with debt collectors, you may be able to offer a ‘settlement payment.’ If you come into a lump sum of money maybe due to help from a relative, a birthday or Christmas then keep hold of it. You may be able to negotiate a settlement payment that’s significantly less than what you owe- even up to 50% in some cases depending on how old the debt is. This will allow you to pay it off and get it out of the way for good.
Use any savings
There’s no sense in having savings while you have debt. Due to things like interest rates, it makes much more sense for you to use whatever cash you have to reduce the balances of your debts. It can feel disheartening using money you have saved hard for, but the quicker your debts are paid, the faster you can build savings up again.
Consider student loan options
Do your student loans cripple you financially each month? There are some schemes available which allow you to consolidate all of your federal student loans into one much more affordable monthly payment. As you’re able to reduce what you pay (or in some cases write it off altogether), it’s worth looking into. Loan forgiveness is also available in certain subjects, to encourage students and former students to take this career path. Teacher loan forgiveness is one example.
Sell what you don’t need
Sell old possessions to raise money for debt, which will get it paid off quicker. If it’s things you no longer need, you won’t even miss them. You could sell on eBay or on classified sites like Craigslist. You could sell items at a boot fair or use sites that buy things like scrap gold and old technology. If you look, you’re likely to have quite a few items around the house that are no longer useful. So the smart thing to do is to sell what you can, and pay down your debts.