Paying Off Debt Fast: What Your First Steps Should Be
Pulling yourself out of growing debt can feel pulling yourself out of quicksand: The more strategies you try, the more you sink.
Having a step-by-step, financial game plan focused on paying off debt fast provides peace of mind and will keep your head above the sand as you work your way through past money mishaps.
So, take a deep breath and follow our steps on tackling your outstanding debts once and for all. Remember, you can do this!
What Do You Owe?
The first step in paying off debt fast is equally eye-opening and painful: calculating how much debt you owe.
We know many people that are afraid to look at the hideous monster they’ve created from debt, but facing that fear is a necessary step in debt recovery – ignoring debt isn’t going to make it go away.
It’s difficult facing reality, but that scary moment will provide clarity in what you’re up against going forward.
You should organize all of your accounts and debts into a handy spreadsheet or another trackable organizer. This will help you devise a realistic strategy to get out of debt.
Now, you’d probably like to tackle the largest debt first and work your way down to lesser fees. We suggest an alternative – the ‘avalanche method of debt repayment’. This means identifying and tackling debts with the highest interest rates first; higher interest rates lead to quicker debt accumulation, resulting in higher payments over the course of the repayment timeframe.
The faster you knock out high interest debts, the less you’ll pay in the long run.
Minimum Payments, At Least
Even when you’re prioritizing larger debts, you can’t ignore those smaller, ankle-biting ones either.
Be sure you’re making at least the minimum payments on all your low-interest debts while maintaining the priority payments on debts with high interest. Once those are slowly taken care of, work your way down the list to the lesser debts!
High Interest, High Priority
To pay off that high interest debt, you’ll need to calculate an achievable payment plan that’ll keep you on track. Otherwise, by making just the minimum or insufficient debt payments, you’ll keep accumulating interest charges and never pull yourself out of debt.
Try to set up timeline, maybe six months to a year, for paying off that high-interest debt, including the ideal amount to pay per payment to reach that goal.
Soften the Blow
You have all the information you need – now you can leverage this newfound power to minimize the financial impact of your outstanding debts.
There are a number of ways to tackle debt, but one of the best may be debt consolidation. You can do this by taking out a personal loan in which to consolidate all smaller payments into a large lump sum. It’s easier to manage and less daunting to make a single payment rather than multiple every month.
If you know you’re going to be late on a payment, be transparent with your lender. This can save you from accruing extra fees or damaging your credit score.
For example, you can speak to your credit card provider if you’re going to make a late payment and explain you can’t make it in time. You may be able to work out a split payment for the month so you can dodge late fees. A simple act of courtesy and responsibility can extend a deadline, reduce fees, or remove them completely.
While you navigate your minefield of debts in the now, don’t forget about the future.
It’s still as important as ever to save what you can, and to build an emergency fund for those rainy day, unexpected expenses. An emergency fund will save you from adding to your debt if your car breaks down, you don’t get that work bonus, or when your penny stocks investment inevitably falls through.
You probably have everything you need to pay off debt fast – besides maybe the funds to execute your financial plan.
Consider a personal loan from Magical Credit to help you manage your high interest, priority debt payments. A short term loan can assist with debt consolidation, diversify your credit, and prove to lenders that you’re a responsible borrower, setting you up for better borrowing rates in the future.
See if you qualify and fill out our online loan application – it takes under 5 minutes to complete!