Having a lot of debts can give sleepless nights to anyone and can become a hindrance towards leading a healthy financial life. Sometimes certain circumstances such as loss of job, recession, or a bad accident can create money problems. Other times, debts can pile up because the interest rates that you are currently paying are much higher than the usual interest rates.
Here is an example to illustrate this. You have taken one personal loan and one auto loan at 18% and 14% respectively, and you qualify for a personal loan at 13% p.a. In this case, it makes sense to use the personal loan to pay off your debts completely and repay your personal loan at a much lower interest rate.
By learning how to pay off your debts, you can release a lot of burden and focus on your financial goals without any troubles. Proper guidance and an efficient game plan can help you get debt- free in no time.
Here are a few ways by which you can get out of debt:
1) Take up a Personal Loan for Debt
You can take up a personal loan at a lower interest rate to pay off your current loans. Taking up a personal loan for debt will save you from the hassle of making multiple payments on all your loan EMIs. What’s more, the loan can be obtained instantly with minimum documentation and short approval time. Moreover, it is an unsecured loan and thus there is no risk of losing the asset in case we fail to repay it.
2) opt for Debt Consolidation
You can also opt for debt consolidation to make it easier for you to pay off your loan. Debt consolidation means combining all your small loans into one large loan. The consolidated loan usually has a longer repayment period or lower interest rate or both. This can help you save up some amount every month and is also a more convenient option over making multiple payments on your loan EMIs.
3) Pay off your most expensive debts first
This is a good strategy to get rid of all your debts fast. You should identify your most expensive loan and put all your energy to pay that off first. This would reduce a lot of your burden and you will feel motivated when you see progress. This will also leave you with more liquidity towards the end as you will only be left to pay back your least expensive loan.
4) Transfer your credit card balance
Balance transfer is useful to save up a lot of money. A balance transfer allows you to shift your existing credit card debt to another card which charges a lower interest rate or a longer interest free period. The process is extremely fast and can be completed within hours.
5) Pay more than the minimum amount
Paying only the minimum amount every month will take you a lot of time to pay back your credit card debts. It is advisable to always pay a little more than the minimum amount to get rid of the debts quickly and to avoid being charged high rates of interest.
6) Consider refinancing your mortgage
Getting a new mortgage in place of your original mortgage is another good strategy. This can help you to obtain longer repayment period and lower interest rate. You can also opt for cash out refinancing to obtain more money than you owe. The faster you start dealing with your piled up debts, the sooner you will get rid of them. You can choose one or more strategies to pay off all your debts with ease depending upon your situation and needs. Start your debt-free journey today and realize your dreams.
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