Debt is one thing that everyone dreams to be free from. Getting rid of debt is not an easy task. Each person has to take certain measures so that he can be free from his debts. Getting rid of debt is like climbing up a hill, when climbing a hill how one will take steps to reach the hill in the same way debt can also be easily paid off if one can takes certain measures. If one has to be debt free, he/she has to follow certain measures.
Those measures are:
Sorting of Debts
One of the most important measures to consider while getting rid of debts is to sort all your debts either according to a) time b) rate of interest and c) loan amount (low to high).
-
Time: You need to consider time basis if you have to repay certain debts that are time bound, for example you may have to pay higher interests if you delay certain loans or you may have to repay your gold loans within the time window. There is also another reason why you need to sort the loans by time, considering if you don't plan to repay time bound loans you may end up taking a newer loan to close an existing loan.
-
Rate of interest: One can sort their debts according to interest rates, then they can easily pay off their debts without any extra interest. For example, If you have three loans with interest rates 7%, 10% and 12% then you can choose to repay debts that are higher in interest rates and then clear the lower interest one later. By sorting and repaying based on interest rates as you are repaying higher interest ones first you will save some money in interest payments.
-
Debt Amounts: One has to classify his debts from low amounts to high amounts. So that one can clear his debts by paying lower amounts first. You should always target to minimize the number of debts that you have to manage, it's easier to have one big debt for a longer period than having several small debts. By clearing lower amount debts you can minimize the number of debts you can have to manage.
Reduce Expenses
You can clear your debts if you can cut down your unnecessary expenses. If you take last 3-6 months credit card bills and start sorting your expenses and find out which are unnecessary and can be avoided. Start cutting down your expenses like online shopping, movies or frequency of eating outside and use these extra savings towards repaying your debts based on your prefered strategy described in sorting of debts.
Earn extra income
Nowadays technology has widely spread and you can easily earn money driving Uber, delivering food or doing freelancing. Everyone has hidden talents and one can earn extra income by utilizing these hidden talents, for example you start a youtube channel and start building a fanbase.
Sell Unwanted things
You can sell off certain things which are not in use. Sometimes we buy lots of stuff and dont use it, identify such items in your home and office and start selling them on OLX. Use these money to pay off your debts.