Debt – ah, that four-letter word that sparks fear and frustration to the hearts and minds of a lot of people today. Having debt can be extremely frustrating. Debt is discouraging especially if your goal this year or in the next few years is to be financially independent. Really, COVID has put us all under a debt strain. Until your debts are repaid, you really can’t start saving or investing properly. Here is fast, easy money hacks to get out of debt fast.
You may have to hold off on things like insurance, a house, or even things you want to save up for. And considering how intense some debt arrangements can be – with strict schedules and interest rates – it’s like these debts won’t just end forever. Right?
Well, not quite. There are strategies financial experts would suggest that can help you achieve debt relief, and finally, start your goal to financial stability. Not only that, but a lot of these methods can be started with simple habits that can grow into great money-growing practices. Here are some fast, easy, money hacks to get out of debt fast:
Understand what debt means for your credit score.
A lot of people want to get out of debt as fast as possible not just because of the hassle of having to pay something with money you can otherwise use for other things. Rather, debt plays a huge role in your current financial status, especially your credit score.
Your credit score affects your capacity to avail of special services, financial perks, and even other loans that might help you in the long run. Since we’re already tackling ways to deal with debt, you should understand what your debt means to you before making a sensible plan:
- Pay your debts on time. Credit history is one of the most important elements that’s considered when calculating your credit score. That means just one late payment can have a huge impact on your credit score, especially if it’s for a huge debt. Even if you can’t pay “more” than what you need to pay for the month, make sure you meet the minimum so you avoid accruing penalties for your lack of repayment.
- Be careful when handling your credit. One of the more sensible options we have to eliminate debt is to stop using credit cards, right? Well, there are actually some things you need to put into consideration before you pursue this decision. You can’t max out your credit cards, as no more than 30-percent of your credit should be used to maintain a good score. Meanwhile, not using a credit card won’t exactly “build” credit, either. Lastly, new credit applications have to go through an “inquiry” of your credit report, so a bad credit history can also bring down your credit score – and your chances to score a credit card.
Consider switching up the nature of your debt.
One of the best debt management hacks people don’t seem to consider all the time is to actually change the nature of the debt you’re handling. In a way, you can “control” your debt in a way that makes it more convenient for you to repay it. You can do this by considering switching up the terms of your loans, or negotiating with your lender regarding debt consolidation. Here are some considerations:
- Debt settlement programs help you repay all your debt at once at a disadvantage. They usually charge a service fee for their actions, and this is usually the amount of money you’d save after the debt has been settled. As this lets you pay your debt without paying the full amount, this sounds very advantageous. Unfortunately, in other countries, this can also affect your overall credit score.
- Debt consolidation plans allow you to “combine” or consolidate all of your existing loans into a single payment. This is very helpful for those with a lot of loans to track, such as credit card bills and mortgages. This can result in having one “huge” debt (but lower in total debt when you combine the old ones together) with a set interest rate, and a much more affordable plan for you.
- Bankruptcy can be an effective way to remove credit card debt, as this removes the burden to repay them on your end. Be careful, though, as bankruptcy doesn’t stop collectors from getting collateral that has been stated in your contract. Bankruptcy only removes your obligation to pay the money, and this also affects your credit score for a couple of years.
Change daily habits to make debt repayments easier to handle.
What a lot of us don’t realize is that repayments are often hard to finish because we don’t know how to adjust our habits. When we think of “debt strategies,” we often think there must be big changes that can wipe our debt in an instant. However, that’s necessarily not the case. Here are simple habits you can change that can make a huge change to your debt:
- Avoid extra expenses as much as possible. This means you should start avoiding things that would make you spend unnecessary money – such as streaming, dining out, and other subscriptions. Instead, try to do things you can do at home.
- Buy used or second-hand items if you need to. If you need to buy certain items that can be considered essential spending – such as a new android phone for work or a new computer for studies – consider buying second-hand or pre-loved items.
- Get tech-savvy to do repairs for a fee. You can also earn extra and maximize the use out of anyone’s gadgets with enough research. With articles from sites like Joy of Android, you can actually learn how to fix common and even complex problems with phones and popular devices, letting you become a “freelance” tech repairman to check out errors in devices your friends have for a small fee.
- Sell unnecessary items. If you’re serious about repaying your debts, one of the best things you can do is to live a more minimal lifestyle – this means allocating as much as the money you earn to repaying debts. You can do this by selling unnecessary items that you don’t need at home. This allows you to earn a little extra you can use to “offset” even a few months’ worth of payment.
Meet the balance between repayments and making your savings.
Who says you can’t save money just because you have debt? If you tackle your spending and repayments wisely, you can actually find a smart way to approach your debt in a way that lets you repay your loans but also help you build up your savings plan. A lot of this has to do with timing your payments, and knowing how much you should pay to avoid compromising your current savings plan. Here are some practical tips:
- Check your debt-to-income ratio. This basically states the ratio between how much you earn and how much you have to pay. You can compare your total balance and your annual income to see how much you can pay off annually. You can also compare your total monthly debt with your monthly income to see how much you can repay in monthly. Knowing this allows you to plan your repayments without compromising your budget.
- Begin focusing on just one debt at a time. As much as possible, try to focus on repaying one major debt at a time. Make sure you know which debt has the highest annual percentage rate, as this determines how much interest you’d have to repay the longer the debt stays.
- Pay attention to other things you may need to save for as well, such as an emergency fund you can use to avoid unnecessary loans in the case of emergency. If possible, try to take advantage of tax breaks on IRA or 401(k) payments as well.
The Quick Way Out of Debt: It’s All Up To Your Planning
Remember – having debt is a natural part of anyone’s financial life. Just because you have things to payback doesn’t mean your finances will be ruined forever. With the tips we’ve shared above, you’ll hopefully be able to think of ways to adjust your current finances.
That way, you can make way for debt payments and eventually pave the way for your eventual financial success. Remember, a lot of efficient debt payment has a lot to do with good planning and discipline.
A lot of these methods may or may not work depending on how you plan your spending and how you plan to approach your loans.
One thing is for sure, though – clearing your debt is something you can achieve in a few years, given the right planning.
If you have more tips and tricks to share with your fellow readers, feel free to share them in the comments below! And if you have alternatives to what we’ve shared above, we’d love to know what you think.