Debt is a burden that can drag you down. It's a negative thing, and it's hard to be positive when there are bills to pay.
If you have debt, you're not alone: there are millions of people who have been in your shoes. If you're ready to get out of debt and start living the life you deserve, we've got some tips for doing just that!
You don't want to make the same mistakes as other people. That's why we've put together this list of four ways to get out of debt fast, along with mistakes to avoid at all costs.
If you're in debt and trying to get out, it can seem impossible to know where to start. There are many different options: debt consolidation, refinancing your mortgage, and refinancing student loans.
Since most of us don't have the luxury of taking on another loan right now (and because we all want to avoid interest payments). Here are a few tried-and-true methods for getting out of debt fast:
Pay Off the Highest-Interest Loan First
It's important to pay off the loan with the highest interest first. This is because that loan will take longer to pay off, resulting in more interest paid over time and a greater total amount owed.
To calculate the interest rate on your loans, multiply each monthly payment by 12 and add one. For example: if your monthly payment is $200 and you're paying back a $5,000 loan at 4% annual percentage rate (APR), then your total interest paid over 5 years would be $600 ($200 x 12 = $2,400; 4% x 2 = 80%; 100-80 = 20; 20 + 1 = 21).
The Debt Snowball Method
Using the Debt Snowball method, you tackle each smaller debt before moving on to larger ones. If you have $1,000 loans and one $5,000 loan, you will focus on paying down those three $1,000 loans first. Using this strategy makes sense to pay off credit cards with lower interest rates first.
Negotiate Your Interest Rate
If you're in debt, chances are that your creditors are already charging you interest. It pays to negotiate a better deal if they let you do so. If a lender doesn't want to reduce or forgive any part of your loan, at least ask them for an extension.
Also, try negotiating with credit card companies. They can often cut down on some of their fees and penalties if they know they have customers who don't want their debt hanging over their heads anymore.
Limit New Loans
If you're not already in debt, the best way to get out of it is to avoid getting into it. Don't take out any new loans, and don't use credit cards.
That means don't take cash advances on your debit card, either. They only make things worse because they charge high-interest rates and fees that will further drag down your finances. Don't borrow money from family or friends, either—not even so they can pay off the loan for you! Don’t tap into your 401k retirement fund for an emergency loan; that's a bad idea for many reasons (you will miss out on compounding interest and may be subject to taxes).
Debt is not a one-size-fits-all problem. It's usually a combination of factors that leads to overspending, and the solutions are often specific to your situation. By taking these four steps - being proactive about your finances, starting small, learning from others' mistakes, and keeping things in perspective - you'll be on your way towards getting out of debt fast!