Feeling indebted for the first time is certainly overwhelming. Struggling with debt is difficult at any stage, but facing huge debt for the first time is especially challenging. Read these 7 smart tips on how to pay off debts as beginners and try to see which of them are the most suitable for your situation. Start repaying your debts step by step & you'll notice how your debt burden decreases.
There are multiple reasons as to why people get into debts. These include loss of employment, emergencies such as sicknesses, reduction in income, divorce or increased expenditure among others.
The disasters strike anyone; whether old or young, male or female, tenant or homeowner, and so it's easy to conclude that everyone has struggled with debt at some point in life.
A report by creditcards.com shows that an overwhelming number of Americans are currently living in debts; with 2 out of 3 people revealing that they may leave in debts in their entire lives. According to the report, many Americans have lost hope in ever paying the debts due to the over piling of the debts which have become like a chin hard to escape. This leaves a disturbing question. What are the most common debts which are hard to clear?
Easy Ways to Get Rid of Debts for Beginners
Accumulating one or more debts is like falling in a steep ravine then attempting to climb out when you have nothing to hold on. Fortunately, there are several methods and resources which you can arm yourself with to get rid of your debts as a beginner.
But before we dive in into those methods, familiarize yourself with these terminologies used in grouping debts so that you may understand the type of loan you have:
- Secured debt – this is any debt which utilizes a form of a security/collateral. For instance, using a car or house against the loan. Your lender uses the asset if you fail to pay.
- Unsecured loan – any loan which does not require collateral is grouped under this category. The main types include fast loans and credit card loans.
- Fixed interest rate debt – the interest rates for these loans remains the same throughout the entire payment period. For example, payday loans and mortgage loans.
- Variable interest rates debt – interest rates for these debts changes periodically as agreed with the lender. Credit cards are a perfect example.
- Deductible debt – this loan is used to improve your current situation, and it, therefore, comes with tax benefits. For instance, mortgage or student loan.
- Non-deductible debt – a loan which is not used to buy a new skill or an appreciating asset. E.g., personal loan or credit card.
Use these Tricks to Get Rid Out of Debt Quickly:1
Make a Budget
This is the first step if you don't want your debts to keep ballooning further. A budget will help you to put some brakes on your spending habits, and also assist you to have responsible decisions. It will, however, work if only you stick to it.2
Start With Loans With the Highest Interest Rates
Create a list for all your debts. Your plan will allow you to see the due dates and the interest rates of each loan. Start paying the ones with the highest interest rates. Clearing off these loans first will motivate you to clear the other faster.3
Find for More Ways to Earn Extra Cash
If it's possible to clear off your debts using your current source of income, feel free to find other ways which might generate income. For instance, you can sell off the assets that you no longer use, or look for a new hustle which you can get those extra dollars you need.4
Talk to Your Creditors
Some creditors are flexible and can change the payment period terms you agreed on. Some may even extend the payment agreement period or reduce your interest rate. Other credit companies may also transfer your debts to the lower interest. You only have to explain your current situation and try to negotiate with them.5
You can consolidate your debts if you have an excellent credit rating. The consolidation will clear off your debts and leave you with only one monthly payment, and this will make the debts payments a simplified task.6
Live Within Your Means
Evaluate your current living style and see if it allows you to clear off your debts. It makes no sense to struggle to clear off your debts when you are still living hard to maintain a lavish lifestyle.7
Know Your 'Why'
Think about your future financial goals - whether in the near or the far future. Do you plan to buy a house? A piece of land? These goals will keep you aligned to where you would like to be financially and help you to put more efforts in paying off the debts.
Eliminating all your debts might not be easy, and you can easily continue living in the debt if you don't face reality. You can, however, make it if you:
- Understand your spending methods and habits.
- Create a good plan.
- Stick to it.