Dealing with a ton of debt can be stressful. It can lower the quality of your life and make you live paycheck-to-paycheck. However, with the right motivation and effort, you can pull yourself out of it. Here are some tips you can use to eliminate debt.
Snowball the Debt
A common way to try eliminating your debt is to use the snowball method. First, you must make sure you have enough money to give the monthly payment for all of your debt for each month. Next, the idea is to list all of your debt by smallest to biggest, regardless of what the interest rate would be. Now, you will pay the minimum payment on all of your debt as you would. However, you would throw more money towards the smallest debt. Once it is eliminated, do the same thing to the next smallest debt amount and so on. It is a good way to keep you motivated to pay off your debt.
It may seem counterintuitive to borrow more money to pay off debt, but merging your debt may be a good choice for you. If you are struggling to pay multiple debts at one time, you can borrow money to pay off all your loans at once. That way, you can focus on repaying one loan with one interest rate instead of paying off several ones with various interest rates. However, it may be difficult for you to find a lender because you may have a bad credit score because of your debt, so make sure you try to find one with a reasonable interest rate.
If you are paying the minimum amount for your monthly payments each month, it will take you years until you pay off all of your debt. Similar to the snowball method, we recommend that you pay more than the minimum amount.
Look at your monthly income and exclude other things, like your utility bills. Once you see the total amount that is leftover, calculate how much it would be if you paid off the minimum amount for your debt every month. If you have any extra money left over, put it towards your debt. That way, it will be faster for you to eliminate debt.
Follow The 50/30/20 Rule
50/30/20 is a method that works for many people. Fifty percent of your income should go towards housing and other essential expenses. You can use 30 percent for things you want. Then you should use 20 percent for debt pay-down and savings. If you want to make it more efficient, you can use some 30 percent for wants towards your debt.
File for Bankruptcy
If you are facing things like losing your house because of debt, you may find it best to file for bankruptcy. If you file for bankruptcy, it can avoid foreclosure on your home. You should find a foreclosure defense attorney in your area to help you. They will also be able to guide you to eliminate your debt.
People can owe people money occasionally, but it can easily become overwhelming. Follow these tips to eradicate your debt as fast as possible.