How To Pay Off Debt Fast In 2021
If you have a history of excessive debt, a quick plan on how to pay off debt fast is what you need. Gaining control of your finances within the next year is possible with a good plan and effort to match.
The Pandemic And Debt
Most American citizens say the COVID-19 outbreak has led to financial stress, in line with a survey released in October by way of the National Endowment For Financial Education, with 30% listing debt as their biggest cause of stress.
Nearly 7 in 10 U.S. adults say they experienced unexpected financial setbacks caused by the Covid-19 pandemic. The top setbacks being job loss and inability to pay off debt. Despite the pandemic, it is possible to pay down your debt with the appropriate plan. Here’s how.
CONFRONT YOUR DEBT
The 1st step is pretty much straightforward. However, it can be the hardest. You must confront the issue of debt 100%. Most consumers know they are in debt. But, don’t know how much in debt they really are.
Therefore, knowing how much total debt you carry is the primary step to getting rid of your debt. Compile all your debt onto one document or spreadsheet. Research and record all balances, ongoing payments due, etc.
Once you have this information accounted for, you’ll be a huge step closer to getting rid of your debt. Debt is emotionally taxing. But, when you have a greater understanding of what you are dealing with. That feeling subsides.
How To Pay Off Debt Fast With The Help Of Your Lenders
After listing your debt, it’s time to contact your creditors. Ask for a loan forbearance plan to lower your monthly debt payment. Or even pause the payment of your debt for a few months.
These reduced amounts or payments will be due on the back end of the loan repayment schedule. A forbearance will not erase the amount you owe. Make certain to clarify how the pandemic has influenced your finances.
Most collectors will be willing to work with you. Especially, with the pandemic’s effect on the economy. It wouldn’t hurt to say you will do your best to better your financial situation. Then, pay down your debt as agreed upon and apply any extra money you have towards paying off your debt.
If you need with negotiating better credit terms or repayment plans. Contact a reputable credit counseling service such as the Consumer Credit Counseling Service (CCCS) or the National Foundation for Credit Counseling® (NFCC®).
These Counselors have relationships with creditors and can negotiate new financing terms on your behalf. These services are typically free for those experiencing financial difficulties as a result of the Covid-19 pandemic.
How To Pay Off Debt Fast With A Debt Consolidation Loan
If you have various types of debt such as credit cards, loans, medical expenses, etc. You may want to take out an unsecured personal loan to consolidate them into one monthly payment.
A consolidation loan is a good idea only if you can qualify for a lesser interest rate than those you currently have. Some lenders have tightened their approval requirements during the pandemic, but debtors with decent credit (690 FICO or more) may still have an excellent shot at approval.
If you have credit card debt, you could apply for a balance transfer card. Though these credit cards customarily can charge a 3% to 5% fee, they present an introductory 0% interest period, so all payments go towards your debt, which helps you repay them quicker.
However, be careful when transferring balances to a balance transfer card. When you do this, it creates the opportunity for you to use your newly balance-free cards to make new purchases. Which will create even more debt.
It could make mathematical sense to consolidate your debt. But the math is meaningless if we don’t account for our conduct. Decide on a strategy and FOLLOW it.
Use The Snowball Or Avalance Method To Payoff Debt
With the Snowball Method, you repay your smallest debt first by paying as much as possible on your smallest debt until it’s fully repaid. While making minimum payments on the others. Then go to the next smallest and so forth.
With the Debt Avalanche Method, you pay down debt by getting rid of your balance with the highest interest rate first. With this strategy, you make minimum monthly payments on all your other debts but pay extra toward your debt with the highest interest rate until it’s gone.
You will then apply your minimum payment from the eliminated debt plus more, if possible, to the balance that carries the next-highest rate, and so on.
Get Rid Of The Behaviors That Got You Into Debt
Getting out of debt starts by getting rid of the behaviors that caused you to go into debt in the 1st place. You won’t solve your problem with debt if you never learn how to spend less than you have. How you go into debt doesn’t really matter. What matters is that you don’t let it happen again!
Now that you are taking steps to pay down your debt, it should become a top priority. Because that debt may keep you from achieving other important life goals, like quality time spent with family or buying that new house.
Celebrate Debt Elimination
Celebrate your financial victories! Set small goals along the way within your larger repayment goals. Once you accomplish those goals, make it a point to celebrate those victories. In fact, plan on it and look forward to it. Work towards those fun, debt-free, and positive goals.
Getting out of debt is a journey. The most important decision you can make is to start the process. Take stock of your debts, learn all the details and create a plan. Then, put it into action. But once you’ve started the process, be sure to celebrate along the way. After all, with every payment you make, you’ll be one step closer to debt freedom.