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Author: Ravi Philemon
It’s always important to put yourself in a solid financial position, and one good way to do that is to dig out of personal loans debt.
By: Phoenix Lee/
A structured, disciplined approach can help you get out of personal loans debt whether your balance is $5,000 or $50,000. Follow these eight tips to get out of personal loans debt as quickly as possible.
1. Take stock
Before you start reducing your personal loans debt, know where you stand. A lot of people will say they’ve got a certain amount of debt when in reality, it’s a lot more. You’ll never hit your target if you don’t know where it is, so be brutally honest with yourself. What you need to do is write down the debt and the interest rate on every personal loan you have.
2. Improve your rates
The quickest way to save big on your personal loans debt is to try and negotiate a lower interest rate. If you can shave off even a percentage point or two, you can save hundreds as you pay off your debt. A simple phone call and a polite request may be all it takes. While your credit score will play a large role in whether or not you get a rate cut, it’s not the only factor. Every lender has its own approach to this issue. It never hurts to give it a shot.
3. Track your costs
Write down all your regular, committed expenses (mortgage, utilities, insurance, transportation, minimum credit card payments, phone, internet, etc.), and track other variable expenses such as restaurant meals, entertainment and travel. This will serve as the foundation to your budget.
4. Create a budget
It’s time to take an ax to some of those expenses. The key is to be realistic: You’ll have to make some sacrifices, but you don’t need to live on bread and water. Cutting back can be more effective than cutting out. It’s hard to adjust your lifestyle too dramatically, and often, little adjustments can add up to big savings. Cutting out a single restaurant dinner each week, ratcheting down your fibre TV plan and changing your thermostat by a few degrees can give you the jump start you need. Be sure to give yourself a bit of breathing room in your budget in case an unexpected expense pops up.
5. Choose your payoff strategy
There are two personal loans payoff strategies. The first is to plow all your extra cash into the highest-interest personal loan while paying the minimums on the others — which is the fastest way, overall, to lower your debt. Once the first loan is paid off, you have even more extra cash, and should apply it to the loan with the next-highest rate, and so on, creating a debt payoff snowball effect.
A second strategy to tackle your personal loans debt is to pay off your loan with the lowest balance first while continuing to pay the minimums on the others.
Though this is not the most cost-effective way to banish your debt, it’s the fastest way to eliminate debt on a single loan, and it can be a psychological boost to eliminate a bill for good.
6. Pay for everything with cash
People use less cash when they pay for the purchase with hard cash then with borrowed money.
7. Find your motivation and support
Create concrete goals to stay focused. Maybe getting rid of personal loans debt will allow you to save to go on a dream vacation or stop worrying about every bill that hits your mailbox. Swap stories, successes, and challenges with your family. Or perhaps an online forum where you can feel supported – where you can say “I’m so tired of trying to save money.” There are hundreds of personal finance bloggers and forums where you pull up a virtual chair.
8. Track your progress
While you don’t want to spend every day fretting over your bills, keep an eye on your spending. Revisit your progress every few months,. You don’t want this to consume your life. It took you awhile to get into debt, and it’s going to take you awhile to get out of it.
These 8 steps are only guides to help you get out of personal loans debt and to put yourself in a solid financial position. Very often, you would have to exercise a good dose of flexibility and common sense to deal with personal loans debt.
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