Falling into a large debt is a traumatic experience that also affects the daily life of the debtee. It can destroy the financial dreams of any person or a business owner.
Whether you are staring up at a mountain of financial obligations or have a low balance in your account, debt can make it impossible to get ahead.
So, paying off debt needs persistence, determination, and dedication. Fortunately, there are some techniques through which you can pay off your debt with ease.
Is Debt a Problem for you?
Debt is not always considered as a problem. But, most of the debtees come across different forms of debts. Be it’s a mortgage of their residences, an overdraft on their savings accounts, or credit cards.
However, debt can be useful if it is treated in a proper way with care. There are very few people who have the ability to purchase a home without a mortgage. But, if your debt is out of your control, then it can destroy and take over your daily life and family as well.
Managed Debt vs Problem Debt
The following circumstances will be considered as the problem debt:
- The total amount of your debt adds more than your income per year
- You are trying to pay off your debt
- If you are unaware of why and where you have these debts
Whereas, if you pay off your debts every month, they don’t exceed your monthly earnings and you are aware of what they relate, it will be considered as the managed debt.
However, if you start to spend more than your earning and using loans or credit cards excessively to reduce the debt, then your managed debt can get out of control and converted into the problem debt.
So, you need to think of debt as a beautiful garden with regular maintenance and watering to keep it pretty. But, if you start neglecting it after a few months or weeks, it will become wild and overgrown.
How to Pay off Debt Fast?
To get rid of your debt, first, you will have to consider the below points:
Evaluate your Debt Situation:
It is quite difficult to deal with your economic situation and take the first step to evaluate it. First of all, you need to create a complete list of all the mortgages, loans, store cards, overdrafts, and credit card debts you have.
Afterwards, you need to review all the debts carefully. Make a note of the overall amount of your debts. You also need to check how much you are currently paying every month to clear it.
Reduce your Expenses by Making a Well-Planned Budget:
A family budget is prepared to calculate your spending habits and income so you have a fair and detailed idea of where your earning is going. Moreover, it also can help you to make changes, which might decrease your expenses.
So, if you stick to the budget, it will ensure that you don’t expend more than your income. So, it potentially assists you to find a way to pay off your debt.
Check the Credit Report:
To pay off debt fast, it’s essential to check your credit report on a regular basis. It can help you to manage your economic health and identify any mistakes or fraudulent applications that can prevent the chances of getting credit.
These reports are arranged by credit reference companies. According to the rules of GDPR, you don’t have to pay £2 to access your credit report from the credit reference companies. So, nowadays, you can access your credit report free of cost and it’s your legal right.
The data of your credit report is quite difficult for you to understand. But, you can hire a debt counselor who can simplify the information for you. They can assist you by providing a detailed credit score that shows how your creditors are expected to judge you.
Pay off Debt Before Saving:
Saving money is a good practice and it can be used in emergencies. But, there is no logic in having savings when you are struggling with your debt. The interest rest of the instant-access savings or current accounts are more economical than the rate of average interest of a credit card. So, you can use your savings to pay off your debt. Apart from this, it can also help you save hundreds of pounds each year.
Separate your Savings and Debts to Prevent “Setting Off”
If you have the savings and debts, both at the same time and from the same provider, he/she has the power to ‘set-off’ your savings. So, your savings or current account can be utilized to eliminate the debt like a personal loan or credit card.
While it is quite absurd to happen, but it can. Most of the time, it happens when you are balancing your debt repayments and would have a big influence on your personal cash flow. So, to avoid this, you can transfer your current or savings account to a different provider or financial institution.
Pay Attention to your Mental Health
According to reports, one-fourth people of the United Kingdom undergo a mental health predicament each year. So, worrying about debts can lead to such problems.
The good news is, there are several ways you can take to get rid of this situation. But before that, you must remain healthy and mentally strong while dealing with debt issues.
How to Boost Income to Get Extra Money for Paying off Debts?
You can earn some extra money to increase your income. It can help you to eliminate your debt within a short time. To do this, you can follow the below strategies:
Inspect your Tax Code
Ensure that you check your tax code every year. You also need to check the code on your payslip regularly.
Most people in the UK will have the tax code 1250L. It is the basic code for the tax year 2019-20. But, it is also possible that you might have a separate code. If that is the case, then you might have to pay overpaid or underpaid tax. So, you can ask for a refund if you are paying extra.
Check if you are Qualified for Marriage Allowance
If you are married, one of you is a non-taxpayer and your spouse is a basic-rate taxpayer, you can get £250 or more than that from HMRC (Her Majesty’s Revenue and Custom). Over a million couples are eligible for it but, still haven’t applied to receive the allowance in the UK.
The Marriage allowance is introduced in the UK in April 2015. It allows the couple who are lower earners to transfer a part of their personal allowance to a higher earner. The claim also can be backdated.
Sell your Additional Belongings for Extra Earning
Check your wardrobe for the clothes you use rarely or hunt down the toys of your grandchild or children. As long as these are in a fair condition, you can get some extra cash by selling them.
Besides, you can also sell the unused furniture in your home. There are several selling platforms available on the Internet. Hence, you can use any of them to sell your unused household materials.
Check if you had PPI (Payment Protection Insurance)
If you had any type of credit product like a credit card, store card, customer loan or mortgage until 2006 (when the regulator started to imposing penalties for PPI mis-selling), you can use that to reduce your debt.
It’s quite an easy and cost-free process to make a claim to get thousands of pounds. So, if you had that, you can make a claim soon.
Reduce your Outgoings to Increase Savings
You can also reduce your outgoing to increase your savings. With the help of these savings, you can pay off your debt fast. Following are the points where you can reduce your outgoing:
Learn how to Haggle
It may have a less and immediate impact on your debt but, can help you to reduce it. Haggling may not come naturally to you but, some ideas can lead to great savings of household bills.
So, with this technique, you can decrease the bills for energy consumption, broadband, mobile phone, and insurance.
Reduce Costs by Switching the Insurance
Remaining loyal to any particular insurer for a long time can affect your pocket. Insurance deals, whether it be for your travel purpose, car, or home, is always a good choice for the new consumers.
But, you have to ensure that you are not enhancing your outgoing unnecessarily by expending more than you require for the insurance. So, whenever the policy comes up for renewal, check all the deals to pick the best one for you.
Avoid Branded Groceries
Another way to pay off your debt is to reduce your expenses in other fields in your house. The easiest way to do this is to switch a brand while purchasing groceries for your home.
So, if you usually purchase branded groceries, try purchasing low-brand groceries from the supermarket. If the own-brand groceries of the super-market matches your persona, you can give it a try.
Reduce your Council Tax Payments
If you are paying council tax, you can reduce the amount you pay for it. For example, if you are unmarried, on a low income, or disabled, there are many council tax discounts for you.
Furthermore, if you believe that your house has been set in a wrong council tax and the bill is incorrect, you can appeal your council tax.
What Other Benefits and Grants you can Get to Waive off Debt?
You also can check what advantages and grants you can get, which can help you to eliminate your debt fast.
Check your Eligibility for Tax Credits
Tax credits are advantages provided by the state govt to offer some extra money to disabled or certain groups of workers. Sometimes, it is offered to people who are responsible for raising their children in medical or other daily life circumstances.
There are two types of tax credits you can get – working tax credits and child tax credits. Furthermore, it is tax-free income and you don’t have to pay tax or opt for National Insurance to be eligible for it.
Now, whether and how much you qualify for the credits, it completely depends on the circumstances and your overall annual income.
Claim Child Benefits
As it is mentioned earlier, if you are responsible for a child, then such benefits can help you. So, you will receive a certain payment from the State govt.
For this, it is not necessary to be the parent of a child, in case you are looking after him/her in the absence of their parents. If you qualify for the child benefits, then it could be worth nearly £1,000 per year for your first child.
However, to claim the child benefit, he/she must be either under 20 or 16 years old. Also, the age of your child needs to be approved by a training or education institution.
How to Get Rid of Credit Card Debt?
You can control the debt of your credit card to pay it off fast. For that, you can follow the below points:
Switch to a 0% Balance Transfer Credit Card
The base interest rate of BOE (Bank of England) is 0.5% since March 2009 and is raised to 0.75% recently. The rate of the average credit card has reached more than 18%. So, if you are paying interest for the debt of your credit card, you can switch your balance to a 0% balance transfer deal.
It is one of the best deals that comes with the offer of providing up to 32 months, free of interest.
Furthermore, if you are in a relationship and one of you have debt, some credit cards let you shift the balance of your partner. Hence, you can transfer the amount to the other card to pay off the debt.
Reject Increments in the APR of the Credit Card
If you withdraw cash using your credit card or pay off anything less than the total amount on the statement, you will have to pay the interest charged by the card provider company.
If the card provider company decides to enhance the rate of interest, then they will contact you within 30 days beforehand. So, you will get the time to decide what you want to do with the credit card.
Besides, you will be given a time of 60 days to reject the hike or cancel the card. It enables you to pay the amount at the interest rate during that time.
Here’s How to Get Rid of Overdraft Debt
If you are struggling with overdraft debt, you can follow the below points:
Get an Authorized Overdraft
If you think that you are likely to exceed your existing limit, or go into an overdraft, you need to contact your bank. Try to do this as soon as possible, as it may increase your authorized overdraft.
Moreover, welcoming an unapproved overdraft may trigger a complete host of additional charges, which can be more costly than a payday loan.
Use a 0% Money Transfer Credit Card
If you use a 0% money transfer credit card, it can help you to shift the amount in your credit card to a current account of your building society or bank. Furthermore, it can also help you to unlock the balance of the credit card into cash.
Thereafter, you can use this amount to get rid of the overdraft. So, with the help of the money transfer credit card, you can shift your balance for free. Also, the debt left on your credit card remains free from the rate of interest, for as long as 2 years 4 months.