Debts can weigh you down and deny you the peace you need to live a happy life. People usually take loans with the intention of paying them off in full and on time but sometimes challenges arise that make it difficult for them to adhere to the conditions in their loan agreements. Failed businesses and poor investment decisions are some of the reasons people and business entities are not able to live debt-free.
Become Debt Free
Sometimes individuals and businesses borrow more than they need and this brings about challenges in paying amounts owed. They, therefore, end up with a lot of debts as a result of partial and late payments. If you find yourself in such a situation, here are a few tips that will help you become debt free as quickly as possible.
1. Identify and list all your debts.
The first thing that you should do is to identify all your debts so that you can plan how you will pay them off. This includes your bills as well as any loans that you may be servicing such as your business loans online. Make a list of all your debts and arrange them from the smallest to the largest. The next step is to arrange your loans according to the interest rates charged on each loan. List them in a descending manner with the loans with the highest interest rates at the very top. When paying the loans later on, you should prioritize those with high interest rates since they are costing you a lot and clearing them early will bring about a lot of relief.
2. Always make the minimum payments every month.
This is the key to clearing your debts. Every month, you should strive to pay the minimum amount required for your debts. When you do so, you are able to avoid the fees and penalties that are associated with late payments. If your plan is to pay the high-interest loans first, then you should pay as much as you can for the high interest loans and at the same time make minimum monthly payments on the other loans. Don’t forget the smaller loans since they are loans just like the rest and you could ruin your credit score when you fail to pay them up.
3. Budget your finances.
Since all your efforts should be geared towards clearing your debt, you should try to cut your expenses on extravagant and irrelevant items such as movie and lottery tickets. To do this, you need to make a budget whereby you highlight how you will be spending your money. A huge portion of your income should be directed to loan repayment and the rest used to meet other needs in your home or business establishment.
4. Increase your income.
This is another option that will help you clear your debts as quickly as possible. With a lot more cash, you will be able to pay off your debts comfortably and quickly. To increase your income, you can start a business on the side that you can run with the help of your family members. You can also explore income generating activities online such as freelancing and product marketing.