Debt comes in a number of different forms, some of which are actually good, while others are considered bad. Either way, debt can become worrisome when it starts to threaten to outstrip your income. These clever ways to crush your debt can help you get things back on track.
Let’s take a look.
Review Your Budget
Sometimes, getting a handle on debt can be as simple as restructuring your spending. Perhaps there are some areas in which you can cut back, or spend smarter. That coveted cup of coffee for you’re currently spending five dollars every day on your way to work can put $200 back into your budget if you buy a thermos and make it at home. That $200 can go a long way toward reigning in potentially runaway debt. Looking for other areas of spending in which to be more conservative could result in even more cash to put toward those debts.
Consolidate Your Debt
Yes, taking on debt to rid yourself of debt absolutely does sound counterproductive. But it isn’t when we’re talking debt consolidation. What is debt consolidation? Bundling all of your high interest debt into a single instrument, ideally at a lower interest rate, can reduce the amount of your monthly payments and make your debt less costly to pay off. There are a number of ways to accomplish this.
The most common are balance transfer credit cards and debt consolidation loans. The key to success with either of these is to be certain you can pay off the amount you consolidate in accordance with the terms of the loan. You must also be careful to avoid running up the accounts you consolidate, while you’re paying off the consolidation loan. This could put you in an even deeper hole.
Snowball Your Debt
This tactic entails making minimum payments on all of your debts, save the one with the lowest balance. Let’s say you have five debts and a total of $1500 monthly you can apply to them. Rather than splitting that $1500 five ways, give the four highest balances the minimum payment and put the rest of the money toward the one with the lowest balance — until it is paid in full. Do the same with the next lowest and so on and so on. Keep going until they’re all paid off. This tactic will clear all five debts much faster than if you’d kept chipping away at each one a little at a time.
Avalanche Your Debt
This approach works the same way as the snowball, except you’ll go after the highest interest rate debt first and work your way down through them. This move will often cost less than the snowball in the long run, but it can also sometimes take longer to see results — it all depends on which outstanding balance is tied to which interest rate.
Ask Creditors For Better Terms
There are a number of different ways to do this. It could be as simple as requesting a lower interest rate. Lenders will sometimes agree to that, if you’ve been a good customer and always paid on time. You can work with a credit counselor to find more money in your budget and negotiate more favorable terms, such as fee waivers and interest reductions.
Another way to go is with a debt settlement offer, in which you promise to make a one-time payment in full of a balance if the lender will agree to discount the amount you owe. A good debt settlement company like Freedom Debt Relief can be of considerable help in that regard.
These five clever ways to crush your debt could help you get your finances back on track and ultimately help you achieve debt freedom.