Learning how to get out of debt can be a challenge, but it is possible. Often, paying off debt takes time and sustained effort. And while slow and steady can certainly be effective in most cases, what if you need to pay off debt quickly to qualify for a loan or a mortgage? If you find yourself in that situation, here’s how to get out of debt — and fast.
Strategy #1: Make and stick to a tight budget.
The barer your budget, the more you’ll save. Ask yourself what is truly necessarily to survive. Certain items, such as mortgage payments, food, utility bills, are must-haves, of course, but perhaps there are ways to save on those items, even if it’s just cutting back for a short time. Consider making a personal budget template and (the key thing) actually sticking to it.
Strategy #2: Make more than the minimum payment.
If you’re only making the minimum payments every month, it’s going to take a lot longer to get out of debt as interest piles up. And even longer if you keep adding to the balance. If you’re carrying credit card debt, student loan debt, or personal loan debt, making a plan to pay more than the minimum can get you out of debt a lot quicker.
Strategy #3: Use the snowball method to pay off debt.
In order to get out of debt fast, you need to know where you owe and make a plan. List all the debts you owe, from smallest to largest. Make the minimum payments on the largest debts and throw all extra money into paying off your smallest debts. As each smaller debt is paid off, take that money you were using to pay them off and put it towards the next smallest debt, until eventually you’re down to your largest loans and the whole of the debt is gone.
Strategy #4: Earn more money.
This may seem obvious, but if you need to pay off debt quickly and your budget is already maxed out, you may have an income problem — and you need a solution. Whether that’s asking for a raise at work or picking up a side job for a few months, putting that income toward your debt will lead you toward financial freedom. If another job isn’t an option, you could sell personal belongings that you don’t need.
Strategy #5: Get a consolidation loan or refinance your mortgage.
If the amount of debt you carry is too much to pay off quickly through budgeting and earning extra income, it might be time to look into other options. A debt consolidation loan can put all of your consumer payments together into one loan that you can pay off at a lower interest rate. If you own a home and have equity available, you also might be able to refinance your mortgage to pay off some of your debt.
Strategy #6: Seek expert advice.
If you’re in debt, you don’t have to go it alone. Most financial advisory companies offer free credit counselling consultations. You can speak to a debt management expert who will help you evaluate your situation, look at options, and make a plan for paying off debt.
Fuller Landau’s debt management experts are known for their personal approach. We believe that from the moment you call our office or walk through our doors in search of debt relief, you are entitled to be treated with dignity and respect. If you need to know how to get out of debt, you can count on us to help you get there. Call us today to schedule a free consultation: (416) 927-7200.