A few handy tips to get out of debt and achieve financial freedom
Are you drowning in the sea of debt? If yes, then you need to work out a plan to eliminate your financial liabilities immediately. The credit card debts can really afflict you, as the accruing interest on the principal balance can make them unaffordable to pay off. What is the mantra of getting out from the trap of debt? You need to follow a few basic steps in order to get out of debt with ease.
Here are a few basic steps you need to follow to get out from the trap of debt:
1. Budgeting-Act as a shield: Budgeting is considered as an effective shield to protect you from financial crisis in future. You can exercise financial discipline when you’re on a budget plan. It is easier to track your expenses as you can get a bird eye view of your financial situation. You can effortlessly keep tab on your expenses; therefore you can avoid splurging your hard earned money. As a result, budgeting can help you to save considerable amount of money in the long run. You can use your savings to consolidate your multiple high interest debts, without taking out a new loan.
2. Prepare a list of the owed amount- When you’re planning to pay off your debts, make sure you arm yourself with knowledge about your financial situation. Like professional debt arbitrators, you need to prepare a list of the owed amount in descending order of the interest rate. It is easier to pay off your debts when you’re aware of the total amount you owe to the creditors.
3. Negotiation-Best ways to lower your owed amount- When you’re unable to pay off your debts, negotiate with the creditors to lower the interest rate on the principal balance. Initially, the creditors may not agree to negotiate with you. Therefore, you can provide evidence of your financial hardship to convince the creditors for negotiation. The monthly payment reduces, once you manage to lower the interest on the principal balance.
4. Try avalanche method of payment- Are you aware of avalanche method of payments? You don’t need to worry as it is not a rocket science. It’s really simple! Once you prepare a list of the owed amount in descending order of the interest rate, start paying off the debt on top of the list. In the mean time, make minimum payment on remaining balance. Once you pay off the debt on top of the list in full, you can shift to the next debt on the list. Make sure you continue the process unless you pay off the debts in full.
5. Borrow from friends or relatives- If you do not have enough money to pay off your debts, then you can borrow from your close relatives or friends to consolidate your debts. Most of the family members do not charge interest on the loan. Therefore, it is beneficial to consolidate your high interest loan with the interest free loan.
Therefore, you can choose any one of the ways to get out of the debt trap on your own. Once you pay off your debts, you can regain control over your financial situation.