Are you someone who is drowning in huge debt? Do you feel like getting out of debt will take the whole life? Are you fed up by making the minimum monthly payments of the sticky debt for a long time?
If all the answers are "Yes", then you are not following the right way to get out of debt. You need to take some extreme action to get out of debt. Many people have already paid off their debt and living a debt-free life.
So, here are 3 debt hacks that you can consider when you’re in knee deep debt.
3 Ways you can get rid of your debts
1. Try to hack debts on your own
- Debt consolidation loan
Many banks offer debt consolidation loan to the debtor to pay off the multiple debts. These loans are very much like personal loans. You can take out these loans especially for the purpose of consolidating your bills. These loans have a much lower rate of interest than what your creditors will charge you. Thus, you need to pay lower than what you were originally meant to pay.
- Balance transfer method
You can transfer the highest interest rate credit card balances to those credit cards that have a low-interest rate. This way you can transfer your debts under one credit card and the total amount that you pay as interest also reduces. You will then have to pay towards only the particular card that you have shifted all your balances to.
- Follow the debt snowball method
Following the debt snowball method is one of the easiest debt repayment ways that you can manage on your own. To follow the debt snowball method, you need to list your balances from lowest to highest. Now start making the minimum payments on all debts while making larger/extra payments to the lowest one. You should make all your extra payments towards paying off the debt with the lowest balance.
Once you pay off your smallest debt, you need to target the next smallest debt. Follow the same process until you pay off all your debts.
Debt snowball helps to grow a confidence in you. It motivates you to pay off the rest of your debts.
- Follow the debt avalanche method
Debt avalanche is also an effective method to get out of debt fast. In this method, you need to list debts from highest interest to lowest interest. Now make the minimum payment on all debts while making extra payments to the highest interest rate debt. After paying off the highest interest rate debt, target the second debt which has the highest interest rate. Follow the same process until you pay off all the debts.
2. Hack your debt by considering professional help
- Consider credit counseling
If you’re going through the debt crisis and you can't manage debt on your own, then seek credit counseling.
The credit counselor will help you to understand the better money management tactics. They can also help you to choose the right debt repayment option to hack debts fast.
- Enroll in a debt consolidation program
You can enroll in a debt consolidation program to get professional debt relief. The debt consultant will negotiate with your creditors and try to lower the rates and revise the monthly payments on the accounts. You just have to make a single monthly payment towards the program and the consolidation company will disburse your payments among the creditors. This way, you will get out of debt sooner.
- Settle your debts
If you have multiple high-interest rate debts that you can't repay in full, you can go for debt settlement. Settling higher-interest rate debts can help you save money in the long run.
Senroll with a debt settlement company.o, you can contact a debt settlement company first. They will assess your total income, savings, and the total amount of debts you owe. They will negotiate with your creditors to reduce the total debt. They will ask you to sign an agreement and pay an agreed upon amount to the company each month. The money you pay each month will be saved in an account called "escrow account".
The debt settlement company waits until you save a good amount of money in the escrow account.
Once you save a lump sum amount, the company will disburse the amount to the respective creditors. This way you can settle your debts with the help of professionals.
- File bankruptcy
Bankruptcy is considered as the last option to get out of debt fast. It helps to repay all debts under the protection of the federal bankruptcy court. Chapter 7 bankruptcy is a liquidation process. All your unprotected assets will be liquidated by the trustee to pay back your creditors.
In Chapter 13 bankruptcy, you can file a "Repayment proposal" to get a certain time to pay off the debts….. But, you must be eligible for filing a Chapter 13 bankruptcy. Talk to a good attorney to discuss filing bankruptcy.
3. Hack your debt by following some personal financial tips
It is always better to go for DIY debt elimination to repay debt or stay away from debt.
- Follow a budget
You should craft a budget to track your monthly income. A budget also helps you to stay within your means. Create a budget spreadsheet or use a budgeting app to create a budget. Once you follow a budget, you can also be able to set aside some money. You can put the extra money toward your debt payments.
- Reduce credit card usage
Remember, using a credit card is not a big deal. But the main things is paying the bill in full and within the time. So, don't use credit cards to buy things that you can't afford. Use a credit card only when you know you can repay the bill.
- Negotiate with your creditors
If you think you can't repay the credit card debt in full, then talk to your creditors to request for a reduced payment. Share the financial hardship that you are currently facing to get some debt mercy from the creditors.
The key to paying down your debt faster is practicing good financial habits. Reduce unnecessary spending and live on less to save as much as possible. Once you save a lot of money, you can put all the money toward your debt. Also once you get rid of debt, try to stay away from further debts. Live on less and repay bill on time to avoid future debts.