Pay off debt 2020. Stop worrying about paying off your debt! This quick and easy formula will help you budget accordingly to pay off your debt in a timely fashion.
In this day and age it’s almost impossible to get through life without racking up at least a little bit of debt, and the best way to avoid serious financial trouble is to be prepared to face it head on.
Here are some recommendations for leading a more financially free and fiscally responsible life.
Pay Off Debt Step One – Create a Budget
Create a monthly budget allowance that takes all forms of spend into account. We all know how difficult it can be to keep track of our funds. Once you’ve got a budget put together, it’ll be easier to spot the places where you can cut spending. Most of the time nothing drastic will need to happen unless you have a serious spending problem, but that’s another topic entirely.
Start with reducing expensive inessential activities like eating out, shopping for things you don’t need, paying for unnecessary cable TVservices, and reducing your telephone or cell phone bills to create an opportunity to reduce your debt each month.
Step Two – Focus on One Debt at a Time
Make sure to use the money you’ve freed up with spending cuts to pay off one debt at a time. Focus your extra funds toward a single debt, reducing it by as much as possible each month, since that will cut through the interest rate and start decreasing principal the fastest.
Start with whichever debt has the highest interest rate and you’ll save yourself the most money in the long run. Get that paid off, then switch your target to the next most expensive account, stream-rolling your way through your debts until there’s nothing left and you’re in the clear.
Step Three – Leverage Your Savings
If you have money that you’ve been saving in a separate account it is vital that you transfer it out and use it to pay off what debt you’ve accumulated now. Leaving money in a traditional savings account is almost guaranteed to do less for you than paying off high interest rate debts.
Your savings are likely to earn a percentage point or two per year (if you’re lucky), while debt is likely to rack up around the 15-20% rate, so don’t leave money sitting when it could be doing far more work for you by funneling it into a debt. Understand that once the debt is paid offthe savings will return rather quickly.
Step Four – Consider a Second Loan
Many of you may be experiencing one account with a severely high interest rate that, no matter what, you just can’t seem to pay off. In situations like this, one account can drag your finances down and leave you economically burdened. “How do I get out of this situation?” you ask.
Acquiring a secured personal loan at a lower interest rate would allow you to pay off that high interest debt, consolidating your financial liabilities to a single source of debt and simplifying your monthly payments.
Secured personal loans are simple – you offer up an asset as collateral to a lender (using it to ‘secure’ the loan and reduce their financial risk) – and in return, the lender gives you a cash amount that you’ll pay back over time in structured repayments.
For example, the car you own can be used as collateral to get what’s called a ‘car title loan’, allowing you to use the equity you’re built up in your vehicle as collateral to secure your loan. You trade the vehicle’s title to the lender (temporarily, to make sure that you won’t disappear and forget about your debt), and the lender gives you a cash loan. After you’ve finished making repayments, the title is returned to your name and you part ways with the lender.
These loans can be extremely helpful for short term liquidity problems, but they can also lead to other financial issues, so be careful about entering into additional debt agreements when you’re already having trouble with your existing debt. And beware that if you fail to pay off a secured loan, the lender will keep whatever asset you used as collateral.
Step Five – Negotiate with your creditors
Many people don’t realize that they can negotiate their way out of at least some of their debt, just by mentioning that they’re thinking about declaring bankruptcy. If a lender catches wind of your plan to wipe out all the debt you owe them via bankruptcy, they might be willing to negotiate for a loan modification with a lower interest rate, longer repayment period (giving you lower monthly payments), or even some sort of loan forgiveness.
Credits are often willing to do just about anything to minimize their losses when a loan has gone bad, so be sure to take advantage of that and talk to your lender if you’re having trouble meeting your financial obligations. If you don’t feel comfortable doing this on your own, keep in mind that there are organizations out there who offer these services for a cost.
