Clearing your personal loans is like getting an invisible shackle off and having a fresh start.
If you don’t have a process, staying dedicated to debt reduction goals will be difficult. The greatest approach to keeping motivated is to understand what you stand to gain from debt reduction. We all have our own personal ambitions, so focus on yours.
Use this to create a mental image of your future self – the one with less debt and more money to spend on your ambitions. Remember this image of your future, happy self whenever you are about to spend money that should be going towards your debt. Only by keeping the course can you make that vision a reality.
Pay more than the minimum
Paying more than is planned each month is the easiest method to get out of debt quickly. It’s critical to remember that your monthly payment consists of both principal and interest. The primary component is the money you are paying to reduce the amount you still owe.
The interest component is the monthly finance charge based on the amount you still owe. As a result, you lower the principal amount outstanding every time you pay more than the minimum.
Implement an expedited payment plan
You could use the snowball debt reduction approach in addition to paying extra. Put any extra money you have towards your smallest debt while paying the minimum payments on your other personal loans and accounts.
When the smallest debt is paid off, you add the amount you were paying on it to the payments on your next-smallest loan every month. This strategy is worth investigating if you fail to motivate yourself with merely a vision of the future.
Increase your earnings
The math is straightforward: if you make more, you can pay more each month and get out of debt faster. Earning more simply because you decide you need to is more difficult. Taking on both full-time and part-time work, or even extra shifts at your current employment, is possible, but if that isn’t viable, starting your own part-time side hustle is.
Modify your way of life
Cut back on unnecessary expenditures if you want to pay more towards your debt each month. Everyone’s definition of ‘excessive’ differs, but if you create a realistic budget and are brutally honest with yourself, you can separate your vital costs from the non-essentials. The more money you save by avoiding things you want but don’t truly need, the more you have to put toward debt repayment.
Get rid of anything you don’t need
Is there anything in your house you haven’t used in the last six months or a year? That’s clutter; if it’s valuable to someone else, you could sell it and utilize the proceeds to pay down debt faster. Selling privately is straightforward because several internet services allow you to advertise for free.
However, it would help if you use caution while dealing with strangers. When exchanging cash for items, meet in a safe public place with friends or relatives.
Consolidate debt or switch to a lower interest rate
A smart strategy to get a reduced interest rate on current debt is to shop for personal loans, as long as the interest rate is lower than the average interest rate on that debt. Paying off all your obligations simultaneously eliminates those higher interest rates and simplifies your loan fees and repayments to a single monthly payment.
If you do this correctly, your minimum monthly payment should be less than the amount you were paying previously – thus if you can continue to pay the same amount, you’ll reduce the amount due faster.
Clearing debt requires some forethought and a lot of dedication. Nevertheless, it is a smart step if you begin to feel burdened by debt. When you are comfortable that any leftover debt is worth the ease it adds to your life, debt becomes a tool rather than a burden.