Taking loans isn’t that bad, but if you fail to repay your settlements in the given time frame then it might become stressful for you and even affect your financial condition. Every one wants to clear their debts as soon as possible. But sometimes due to some unforeseen circumstances like sudden job loss, some serious illness, car repair or expensive home repair, people tend to miss their regular monthly instalments. In order to avoid becoming a loan defaulter and to get out of debt fast, there is a list of things that you can do.
There are several ways to deal with your debts if you are failing to meet the loans, day-to-day bills, credit card repayments or another economic commitment like mortgage or rent. Some of them are absolutely free and it can help you to pay off the debt quickly.
There are various free money grant services available in the UK, some are government-sponsored whereas some are free and dealt through private organizations.
Tips to Get Out of Debt Fast
Getting out of debt fast is not that difficult a task as it sounds. As mentioned, there are some things you can do to end your debt worries and get out of debt as fast as possible.
If You Earn More Pay More
Use all the extra money that you earn in a month to pay off the monthly instalments. If you have reserved some coupons from grocery sales then use those credits to pay off the store bills. Moreover, if you have made some extra bucks by working overtime, you can use this money to settle your debts faster. You can always pay more than the agreed monthly instalments. Pay as much as you can afford so that you are debt-free quickly.
Minimize Using Your Credit Cards
If you are determined to clear all your debts quickly, then it is highly recommended that you stop using your credit card or just minimize its usage. This is important for paying your debts as people often tend to spend more using their credit cards. As they cannot see the money, therefore they do not get the exact idea of how much they are spending. But when the credit card bills come, they realize it’s too late to save now.
If you manage all your expenses by cash you will have a clear idea of how much you are spending. But if you are facing difficulty in minimizing your credit card usage you can freeze your card for a few days. This will change your habit of excessive credit usage and you will see a positive difference in the amount of savings at the end of the month. Now you can use this savings to settle your debts faster.
Apply the Debt Snowball method
If you have decided to pay more than the minimum monthly payments, of all your debts, then you can adopt the Debt Snowball method. In this method, the first thing you need to do is make a list of the debts ranking it in the ascending order of the loan amount. Now, use all your extra income and funds to pay off the loans of smaller amounts and make minimum instalments of the bigger loans. Once the smaller debts are settled you will be motivated to clear your other debts as well. Keep putting the excess money to clear the debts on by one until you become completely debt-free.
This process of freeing debts from small to large debts is known as the Snowball Effect. This process has psychological effects as well. You will feel the urge to become financially free as you keep on settling your loans one by one. The main aim of this method is to accumulate all the extra money and using it to settle your loans one by one.
Earn More Money by Freelancing
This is always a great option to get out of debts faster. You can make some extra bucks by working extra shifts or by doing some freelancing. There are many freelancing companies who hire people like this and even pay a substantial amount for their work. You can use this extra money to pay off your debts in order to get out of it early.
Save More Money
If you cut off some of your expenses, you will be able to save a lot more than you used to save before. First and foremost thing you need to do is stop spending your money on things you actually don’t need. You will automatically understand how much of your income you are actually wasting on petty things. In addition to this, you can also stop buying luxury items like branded shoes, bags and wallets for a few months until you get out of your debts. Reduce your regular restaurant visits and coffee shop visits and eat home-cooked food only.
Moreover, you can always apply the 24-hour rule before buying anything. In this rule, you have to stick to a 24-hour limit before buying anything randomly. In these 24 hours, you can actually decide whether you actually want that product and is it that really necessary after all. There is a high chance that after 24 hours you change your mind. And you no longer want to buy that product. You should also spend less on tech devices as they are always expensive. Try to buy only those stuff that you actually need.
Keep track of your Debt using a Debt Calculator
You can calculate the exact debt amount, the additional interest rate and how much amount is left to be paid to your creditor in order to become debt-free using a debt calculator. This type of calculator can be also used for determining the duration to complete your debt repayments or how much time it will take to get out of debt fast. These debt calculators compare the Annual Percentage Rate (APR) of the consolidation loan with that of the Annual Percentage Rate of the combined debt. The final results will show you the pay off duration left, total interest charged and the monthly payment needed to be made in order to settle the debts as soon as possible.
Pay the Debts with the Windfall Money
Windfall money is the money that you get suddenly from an unexpected source. This extra money can be like your salary bonus from work. Or if you get some cash as a gift from your grandparents, family or even friends on your birthday or some other occasions. It is highly advisable not to waste or even use this money. As the money that you got is excess to your income. Therefore, you can use the entire amount to clear any of your debt. If you are lucky enough and got a lump sum amount of money as windfall money, then you can pay off all your debt at once with this amount.
Make a Debt Management Plan and Stick to It
After you have calculated how much debt amount you owe to the creditors, you can make a plan on how to get out of debt fast and save money. This debt management plan should be customized according to your financial situation and should take care of your needs. This plan will keep you on track so that you never miss an instalment and even make things less complicated. You can make a debt management plan using a budget tool or online budgeting app. Mostly these budgeting tools are free to download and use.
If you stick to your Debt Management plan, it will become very easy for you to clear your debts before the time period. In addition to this, the debt management plan will also help you manage your everyday finances and track your expenses. If you follow this plan you will know how much you are spending on which things. If you see that a huge portion of your income is spent on futile things, then you can stop wasting that money. And use that money to pay your monthly instalments.
Fix a Target on the Amount you Want to Save
If you set a target on the amount you want to save, it will become much easier for you to achieve your goal. The target will keep on encouraging you to not lose hope and keep trying until you become successful in saving the desired amount. Fixing a goal makes people save a lot faster than those who do not have any target. You can also chalk out the amount you will need every month so that after sustaining all your living expenses, you will be left with enough amount to achieve your saving goals.
After deciding the target amount you want to save, you can decide how to pay off the amount in a fixed time frame-
- Calculate the time period to clear all your debts.
- Add all the repayments to be made in that given time.
- Now you can choose your own time frame under which you want to clear your debt.
- Check if the amount you decided to save will be enough to clear your debts in the chosen time frame or not. Keep in mind there should be enough money left for your daily expenses.
Double Your Payments
If you are saving more than enough you can then you double the amount of monthly repayments. You should not stop following your debt management plan even if you have cleared one or two debts. The faster you clear your monthly instalments, the faster you will get out of the debt.
Convince Your Creditors to Negotiate the Final Settlement Amount
There are several cases where the creditors agree for a lower settlement amount than your actual loan. You have to make a good proposal to your creditor so that they agree on your term. Reducing the settlement amount is a great way to get out of debts earlier than the expected time period. The creditors usually agree to lessen the final settlement amount or lower the interest rate if they find your credit rating to be higher. If your credit ratings are high that means you have a good record at paying your previous debts on time without any delay or being a defaulter. Therefore, you should definitely try to convince your creditors or loan providers and negotiate with them in order to lessen the final settlement amount or even reduce the interest rates charged on the loan.
Make a Separate Fund for Emergency
There is a preconceived notion that you cannot save money if you are under debt. But this is a wrong concept. Saving money is important for everyone. We have no control over what will happen in future but at least you can take precautions. For that, what you can do is create a separate emergency fund account. If a situation arrives when you suddenly lose your job or come across a major health problem, you can utilize this money there. In that case, you do not have to compromise with your monthly debt repayments.
You can decide when to create this emergency fund account. Whether you want to pay some of your instalments before or start saving for an emergency fund as soon as possible completely depends on you.