With nearly 48% of South Africans living with debt impaired records, it’s important to watch your spending if you don’t want to be part of this statistic. The growing number of people who end up with debt is frightening, but it’s become a fact of life for many. Even when you’re drowning in debt, becoming debt-free is still possible!
Living in debt is not only detrimental to your financial life, but also to your family life and even your health. The stress that you live under when you’ve stretched your spending beyond your means can cause major health issues. If you want to live a happy and healthy life, paying off debt is a must.
If you’re struggling and can’t figure out how becoming debt-free could even be a possibility, you should know that you still have a chance. Follow these 7 tips to get out of debt and stay out.
1. Pay Off More
When you’re paying off the minimum payments every month, you’re keeping your credit score healthy but you could also be paying more in interest. If it’s possible to pay off your debt in a larger amount, increase that number.
If you can put at least 15% of your pay aside for credit cards and loans, you will make a serious dent in what you owe. Rather than paying compounded interest every month, you’ll start gnawing away at the principle and paying off your debt quickly.
While it may take some budgeting on your part, it’s better to pay it off sooner than to take your time. You will save money in the long run.
2. Pay Off Large Debts With Savings
It’s not a bad idea to devote a chunk of your savings to pay off some of your high-interest debt. If you can take care of a big portion of it, you’ll save money on those interest payments.
It might seem stressful at first, but that cash will be better used so long as you predict your income will be steady. You’ll have to rebuild your savings, but if you consider the amount you’ll save in interest payments, you can imagine that as part of your overall savings too.
3. Negotiate With Your Lender
While interest rates can feel oppressive and binding, they’re not necessarily written in stone. They’re the amount that your lender wants to receive for the price of lending you money. But the longer you take to pay them off, the longer they’ll be without that money.
They might be pleased to replenish their own accounts if it means getting a little less than they hoped. Real cash today is much more valuable than the promise of cash tomorrow.
If you’ve been paying off steadily and have a good relationship with your lender, they will often be pleased to bend the rules if it makes them money sooner. If you’re on the path to becoming debt-free, this is a surefire way to get you there.
4. Pay Down Debt With Your Refund Check
If you’re entitled to a tax refund this year, you might be thinking about what kinds of ways you can treat yourself. You might be imagining a tropical vacation or a new pair of shoes to take your mind off of your daily stress.
Why not get rid of your stress entirely by using that check to pay off your debt?
Paying off a debt in a lump sum rather than monthly payments takes away the opportunity for your lender to charge you interest. Pay off your debt with your refund check and you’ll be sure to have a much better time on vacation next year. You’ll be out on the beach, debt-free, with your troubles behind you.
5. Sell Unnecessary Items
If you’ve got some technology, jewelry, or valuable collector’s items that you don’t need or don’t use, why not unload them online? You can get a quick infusion of cash by getting rid of retro video game systems, baseball card collections, or designer bags.
While you might like the luxury of having these items around, they might not be worth staying in debt for.
Try eBay, a pawn shop, or just placing an ad on social media. These items could go more quickly than you planned. An iPad that you never use isn’t adding any value to your life, so why not have it add value by paying down your debt.
6. Negotiate With Your Boss For More Pay
If you’ve been a dedicated worker, you might be in debt because you haven’t gotten a raise in a while. Talk to your boss and see what they can offer you as far as a pay increase. If it’s been over a year since you’ve gotten one, surely you should get a raise relative to the increased costs of living.
Ask if there are new responsibilities or shifts you could take up. If you get a raise and more opportunities to work, you could pay off your debt rapidly.
7. Try A Credit Card Balance Transfer
Many people use their first credit card, often with a high-interest rate, to build better credit. Once you have good credit, you can qualify for cards with a lower interest rate which is a great tactic for becoming debt-free. If you get a card with an interest rate half of what you’re paying, you can move your debt to the new card.
That way, you’ll be able to pay off at the same rate while paying less interest overall. You’ll also improve your credit by “paying off” the initial card.
Becoming Debt-Free Takes Dedication
If you want to rid yourself of debt once and for all, you need to be committed. You might have to tighten your belt for a few months, but it will be worth it in the end. The amount of stress you’ll be able to shed will be like losing a great weight on your shoulders.
Rather than taking on another debt in the future, check out our tips for getting cash in an emergency.