Debt has its place in the world, but it can easily get out of control. If you are in a stranglehold with debt it can cast a negative shadow over your entire life. Therefore, many people want to get rid of their debt quickly. If you want to get rid of your debt quickly then there are three things you must understand to clear debt fast.
Know Exactly Where You Stand with Your Debt
To make start choices towards clearing your debt, you need to know where you stand with all your debts right now. You need to have exact details so you can create a thoughtful plan that can systematically help you eliminate your debt. This way, you can build meaningful milestones that will give you the motivation to stay on your new path, improving the chances of achieving your goals more effectively without as many setbacks.
Knowing the exact balance you owe, the creditor’s name, interest rate, and minimum monthly payments are is a great place to start. Gather bills for all your debts and bring them all together. Write down everything you know about your debts on one piece of paper.
Lower Your Credit Card Interest Rates
Interest rates can cost a lot of money, especially if you have a few high-interest loans. It can make many people feel like they are running and losing a race. One of the main issues is, the more debt you owe, the more interest you are going to be charged and the more you will owe. It can feel like a never-ending cycle.
If you are feeling overwhelmed by credit card debt or loan debt, you could start working your way out of it by working towards playing as little interest as possible. A smart way to start lowering your interest rates is to look for a credit card with a lower interest rate. This way, you can save a bunch of money by reducing the amount of interest you will be paying you will probably find that overall, you are paying less. Look for introductory offers of 0% interest rates for 12 months or more if possible, to maximize savings.
Say, for example, that you a credit card with a £2500 balance, making payments of £62 per month at a 18.9% interest rate and you do not charge anything else to the charge. You will be paying £3790 over the course of 63 months. You will be paying an extra £1290 in interest alone. Think of all the extra things you could do with that money.
If you increase the monthly payments, less interest will gather over time because you will be paying it off quicker. If we look back at our same example being paid off in 25 months if we decide to double the monthly payment to £124. The total amount of interest paid will only be £480. That is a massive £810 saving.
Get a Loan with a Lower Interest Rate
If you have a collection of personal loans that are weighing you down, if possible, look for a consolidation loan. These loans allow you to take out a larger loan to cover the cost of several other loans at a lower long-term interest rate. Say your total debt added up to about £15000. A lot of those small loans could be from anywhere to 10%-40% APR which is charging you a lot more in the long run. With larger loans, it is often easier to get a lower interest rate. So, you could turn those loans of 10%-40% to one 12% loan that will reduce the overall amount of interest that you are paying.
In conclusion, it is smart to shop around for lower interest rates on every bit of balance you owe. Using a large consolidation loan or a new credit card with a sizable interest-free period is important when looking to shrink the size of your loans so you can reduce the amount you owe and work your way to debt freedom.