Income and savings are two critical things that help you to pay off your debt. Look for extra income source and never spend money without tracking where it actually going. Creating a tight budget can help you to get out of debt.
Debts are a problem that afflicts many people today, mainly because there are more and more companies that grant consumer loans, as there are increasing opportunities to access these credits.
Some debts may be necessary such as debts incurred to acquire a home or investment; But other types of debts, such as debts incurred by personal loans, do nothing more than prevent people from growing financially.
8 Steps to get out of Debt quickly
If you currently have a high level of indebtedness and want to remedy your situation, or just want to reduce your debts and liquidate them as soon as possible, we present below a method consisting of 8 steps that will allow you to get out of your debts:
1. Know your debts
The first step is to inform you well about the debts you have right now.
To do this, you must draw up a list in which you can identify who your creditors are (to whom you owe). How much you have to pay them (the balance of debts), what are the costs of each debt (the interest rate they charge you)? The minimum payment that you are required, and the date you must make the payments.
This list, in the first instance, will give you an idea of the total amount you owe (the sum of all your debts), will serve to plan the payment of your debts, and will be used as a motivation to leave and fulfill what is planned.
2. Stop Acquiring More Debts
The next step is to stop buying more debt.
If you want to get out of the hole you are in, you should stop digging; If you want to get out of debt problem, you should stop buying them.
Therefore, you should stop using credit cards, stop applying for more personal or consumer loans or credits, and stop buying from credit.
You must acquire the habit of buying cash, and if you can not buy something in cash, you simply should not buy it.
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3. Seek greater income from money
The next step is to look for more significant income from money that will help you pay your debts.
For this, you could look for an increase in soil, look for better soil, increase sales of your business, or find new sources of income, etc.
You could also look for some extra money, for example, by doing some extra work, or by selling any assets you own.
Another alternative could be to ask for a family loan, a loan to your company, or a loan to the bank where you are charged a rate of interest lower than the interest rate that you must pay your debts, for example, a loan to the value of your property.
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4. Reduce expenses
It may be that you are looking for a bigger cash income in the short term, but one thing you can probably do is cut your spending.
To reduce your expenses, you should always look for ways to spend less, avoid unnecessary costs, and consume less.
For example, you could try to buy some used items instead of new ones, eat more often at home, always look for offers or discounts, compare prices well before buying something, consume less electricity and energy, etc.
One way to help reduce and control your expenses is by developing a personal budget.
Also read: How to save money?
5. Negotiate Debts
The next step is to negotiate your debts with your creditors.
To do this, you must communicate with your creditors, be honest with them, explain your situation, and seek some favorable agreement that allows you to reduce your debt or obtain greater facilities to pay.
After negotiating with them, you are likely to be surprised at the facilities that many of them will give you, either a decrease in the interest rate, a reduction in monthly payments. (for example, by extending the term of the debt), an elimination of surcharges, a freeze on payments, and even a decrease in debt (for example, by paying a spot part).
6. Consolidate debts
An optional step, in case you have several debts, is to consolidate them.
Debt consolidation consists of grouping all personal debts (credit card balances, personal loans, etc.) into one.
By consolidating your debt, you not only manage to simplify payments on your debts (since you only have to make a single monthly payment). But it allows you to reduce monthly payments (since it allows you to extend the term of the debt) Above all, lower your debt (since it allows you a lower interest rate on the interest rates of your other debts).
To consolidate your debts, you must approach the bank and apply for a debt consolidation loan to a credit card company and request that they consolidate all of your credit cards into one, or any financial institution that offers this service.
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7. Determine an amount for the payment of debts
Want to get out of debt? Then identify an amount of money with which you can pay your debts.
This amount should be enough to cover the minimum payment of your debts, but it should also allow you to make additional payments that allow you to pay off your debts as soon as possible.
To determine this amount, it is also advisable to guide you from a personal budget. For example, you could decide that this sum is made up of the difference between your monthly income and expenses (monthly balance), or determine that it corresponds to a percentage of your total revenue, for example, 10%.
If after making your budget, you can not get an amount that covers the minimum payments of your debts, or that is not enough to accelerate the cancellation of these, you should seek higher income of money, or try to further reduce your expenses.
One tip is that if your debt level is very high, do not spend all your monthly balance to pay your debts, but also part of the creation of a savings bag that you can use in case of emergency or for future investments.
The reason for this is that if you spend your entire monthly balance to pay off your debts, with the idea of just starting to save after you have settled all your debts, it will probably take several years before you start saving for the future. Which is counterproductive), and you probably get discouraged soon and never get to the saving part.
On the other hand, if you pay your debts while saving money, you will feel that you are progressing financially.
8. Pay the debts
Once you have determined the amount that will be used to pay your debts, the next and last step to get out of your debts is to start paying them.
With the amount that you have destined to pay your debts, you must pay the minimum amounts (to avoid the blackberries). And with the money that remains (which should be the largest possible), you must cancel your debts, starting with those that have the highest cost, i.e., those with the highest interest rate.
Although an alternative is to start canceling the debts in which you lack less to pay, that is to say, those that have a lower balance, so that you can get rid of small debts quickly, and thus you feel a greater motivation for the cancellation of the others.