7 Tips to Get Out of Debt

7 Tips to Get Out of Debt

Over 8 million residents of the UK are unable to service their debts. This situation is so gloomy that a third of these people are uncertain about their ability to clear their debt. If you have had debt before, you already know that it can be an overwhelming and draining experience. While trying to control your debt is the ideal solution, what do you do if you are already drowning in it? Use these tips to help you get into a better financial position.

7 Tips to Get Out of Debt

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1. Take Stock

Integral to your recovery plan is taking stock of your current financial position. To do this, list down all your debt, their payment timelines vs your surplus income (the amount left over after you have deducted your living expenses). This is important because it will help you make judgments for further action.

2. Create a Budget

The next step is to create a budget that allows for the most surplus income. This is important because you will use this surplus income to make larger payments on your debts, in turn, clearing them faster. This will call for some creativity, and you will possibly be required to tighten your belt for a while until your financial position improves.

3. Stop All Borrowing

Once you embark on a recovery plan, make a conscious effort to stay away from new debt. Do not take any more credit. If you do, the efforts you are making towards being debt-free will be redundant as you will not make any progress. If you might not be able to resist the temptation, consider freezing your credit.

4. Explore Income Avenues

If your current income does not make a dent in your debt even with cost-cutting measures, think broader. One avenue to explore is how to increase your revenue streams. Think about having a yard sale to sell off items you do not need and use the proceeds to offset some of what you owe. Do the same with idle assets as well.

Another option is to find an additional job to bring extra income. Depending on your work schedule, you can find part-time Jobs on Jobsora. This site lists full-time, remote working and part-time jobs you can take up on evenings and weekends. 

5. Increase Your Repayments

If you have loans, making minimum repayments on credit lengthens your repayment duration. The longer the repayment duration, the pricier a credit facility becomes. Once you can create a lean budget, cut unnecessary costs and get extra income, use the surplus amounts to make larger payments on your loans. 

6. Focus on One Debt at a Time

If you cannot increase your repayment amounts enough to make any dent in the total figures, its best to go about it differently. Pick one debt and make maximum repayments on it while maintaining minimum deposits on the rest.

This is useful because, in time, you will wipe one out. Once you do, throw the cash you were using to service that debt, alongside your extra income on the next debt.

If you get bonuses at work, tax refunds or any other unexpected amounts of money, pick one account and make a lumpsum repayment. To remain motivated, start with the smallest debts. As you clear each debt at a time, this in itself will motivate you to keep on track.

7. Consolidate Your Debt

Debt consolidation allows you to lump all your debts into one account. The benefits of this include lower cumulative interest rates and easier handling. If you are paying several different debts, tracking their repayment dates and amounts can be a headache.

Find out if this is something you can do and ensure that taking this action will be cheaper in the long-run before taking it on.

One Step at a Time

Because debt takes time to accumulate, it will not go away overnight. The goal is to remain motivated and make small, but productive steps towards a debt-free life. Once you are out of the woods, it will be essential to recognize what led you into debt in the first place, learn your lessons and do better.