Seven Proven Tactics to Get Rid of your Debt for Good
Indebtedness is a problem that cuts across all social classes and demographic groups. Indeed, many Americans today consider being in debt as an inescapable fact of life. However, perpetual debt has been identified as an underlying factor behind such health and social ills as suicide, domestic violence, depression, and hypertension. The good news is that there are certain tried-and-proven measures you can take to get rid of your debt for good. In this guide, we will look at seven of the most effective of these tactics. They are all practical approaches you can resort to that will help get rid of your debt quickly and effectively.
1. Eliminate Non-Essential Expenses
If you are someone grappling with paying off mounting debt, you may consider your current lifestyle one filled with being frugal. However, you will be surprised at how much money you can save by getting rid of some everyday expenses that seem, on the face of it, inconsequential. These may include eating out, buying new clothes, alcohol, cable TV subscription, and many other spending practices. You could consider limiting family commuting and travel to a single, fuel-efficient car. When you consistently stick to frugal living habits, not the ones you know aren’t working, you will gradually find yourself with considerable extra cash between paychecks. This could be all you need to clear your debts.
2. Find Ways to Make Extra Income
While cutting down on expenses may be sufficient to clear debts quickly (despite having a pinch) for most people, for others, it may be either inadequate or impractical. For such, the next best alternative is to take an extra job over the weekends or after regular work hours. But there are other ways of making extra income without working slavish hours. For instance, you can also make good money on the side by selling off items you do not need in the home, negotiating a pay-rise with your boss, or starting in a home-based business.
3. Pay More than the Minimum Loan Repayment
Paying off your loans in installments higher than the minimum monthly payment is a great strategy to get out of debt quickly and affordably. It is a tactic that works well with all kinds of loans, too: from student loans to credit card debt, from car loans to mortgages. However, before you start making loan repayments in larger-than-minimum monthly installments, you should recheck the terms under which the loan was originally taken out. Though it is rare, some lenders charge prepayment penalties if debt is paid off before the due date.
4. Use your Tax Refund Check to Pay Down Debt
Many people treat tax refund checks as windfalls worth spending as soon and as lavishly as possible. While it is tempting to splurge the refund on a spur-of-the-moment holiday or a flashy home appliance, it is a much smarter choice to use the cash for reducing—or even clearing—your existing debt. Making one lump sum repayment of your debt has several advantages. Instead of the short-term satisfaction of a purchase or indulgence, you will enjoy a lighter debt burden over the rest of the year or even for years to come. Moreover, lenders are more likely to take such a gesture as a signal that you are a reliable customer. Consequently, they are more likely to view future loan requests from you favorably and charge you lower interest, too.
5. Use your Life Insurance to Pay Debt
Depending on the kind of life insurance coverage you have, you may use your policy to clear off your debt. Of course, this is a measure you should take only after careful consideration of what is best for you and your dependents, both in the short term and in the unforeseeable future. If you have stowed away adequate savings for instance, the option of cashing your life insurance policy to clear mounting debt may be a sensible choice.
If you have term life insurance, the process of cashing in the policy is straightforward. When an insured person puts up their policy for sale, an investor pays them a lump sum amount. The investor also takes over the premium payments and any future benefits if and when the insured passes away. If you have whole life insurance, also known as permanent life insurance, you do not have to cash in your policy to clear your debts. You can either withdraw cash from the investment component of your policy or just right loans in order to pay off your urgent debts.
6. Get a Consolidation Loan
If you have a series of paycheck deductions going to service your debts every end-of-the-month, you will be dismayed to discover the portion of the money that is used to pay off interest (as opposed to reducing the actual amount you owe) is huge. One of the most effective ways to reduce the interest you are paying on a series of debts is to take a debt consolidation personal loan. However, it is important to note that debt consolidation personal loans are only effective for certain kinds of credit. This is because, compared to secured credit, interest on personal loans is usually higher. But a debt consolidation is an ideal choice for paying off credit card and payday loans at a reduced interest rate.
7. Take Advantage of Statute of Limitation Law to Avoid Paying Old Debts
While the statute of limitation laws on debt vary from state to state, chances are that you are protected from the obligation to pay certain debts which have remained outstanding for over five years. If the period of time specified by the applicable law regarding payment of debts in your state has passed, the lender cannot go to court to force you to pay that debt. You should note, however, that passage of statute of limitation on your debts does not mean your old debts have been written off. Yes, you can ignore paying debts which fall outside the period of time defined in law. However, those debts will continue to show up in the books and, therefore, affect your credit score.
Dealing with mounting debt is stressful. However, the measures discussed in this guide have been used effectively by many people to finally get rid of crippling debt. Indeed, there is a growing community of former debtors who have discovered the joy of living a debt free life. Would you like to become one of them? Do you have a personal experience in managing and clearing debt? Whichever the case, we would be delighted to hear from you!