Debt is money where we usually take some money from banks, NBFCs, and Loan Apps and pay back their money with a fixed interest rate. Getting into debt management is a burden on both personal finance and mental well-being. Debt creates fear in individuals.
You may have debt, which you have taken for some emergency, but getting rid of debt takes a significant amount of discipline, dedication, and planning.
In this blog post, I will cover a few steps where you can easily get rid of debts.
Table of Contents
1] Analyse All your debts
This is the first step, where you need to list all your debts and their interest rates individually. This will give an accumulated value of the amount you have taken as debt, the total interest you have to pay.
2] Create a Proper Budget and Track your spending
Create personal finance Budgeting. You can take the help of free apps to track finance activities. List down the major areas where you usually spend money in bigger sizes. If you notice something that is not necessary to spend, then cut your spending there.
Later, list down spending where you spend for daily needs or habits, including taking groceries, having tea twice a day, food ordering, etc. This won’t look major, but if you save on these things until your debts clear, they also play a significant role.
3] Use Popular Strategy for debt reduction
Many strategies are available in the interest where you can use those and pay your debt. The popular ones are
- Snowball Method – This method tells pay out the smallest debt first, gradually motivating you to finish all your debt.
- Avalance Method – This method tells you to first payout high-interest debts, significantly reducing your overall debt interest.
You can select any of the above-mentioned methods to payout your debts.
4] Negotiate Interest with Loan Providers
Let’s say you have taken a loan from a bank before paying the interest or debt amount. Once request them to reduce the interest and tell them your difficulties, interest rate reduction may occur.
You can follow the same strategy for any other type of Loan provider. Many times there are high chances that you will concession on loan repayment.
5] Debt Consolidation
Debt consolidation is a simple strategy where you take a large loan from any other loan provider and pay off your small debts. By doing this, you will get a significant discount on the interest rate.
6] Increase your monthly income
Lastly, mentioning that you need to increase your monthly income is very important. Above mentioned steps may reduce a little bit of your debt and interest but increasing your income can take you to the next level of debt repayment.
So, apart from your regular jobs, try to find side hustles, which may include freelance, night shift, and intense labor jobs whenever you are free.
Conclusion
Debt repayment takes time, be patient about it. Always try to motivate yourself. One or the other day, you will eliminate all your debts. Use a personal finance app to track and manage your expenses. Follow all the above-mentioned steps you will get rid of your debt.