Updated at 2022-10-19

5 Techniques for Eliminating Debt

Photo Credit: DALL·E 2

There is a ton of broad financial advice available about paying off debt. Gain extra income. Tear your credit cards into pieces. Have fewer meals out. Make coffee at home. These tips are self-evident and ultimately of little use.

Explore these five practical methods for getting out of debt before cutting up those credit cards.

1. Establish a budget for debt repayment

When you don't keep track of your expenditures, it's simple to let debt become out of control. Maintaining a budget is essential to avoiding debt, but it can also speed up debt repayment.

You can clearly see how you spend and save money when you have a budget. Budgeting can help you understand where your money goes each month, especially if you have a lot of credit card debt. Track your spending for a month using a budgeting application to identify areas where you may put extra money toward debt repayment.

2. Snowball your debt by paying off the smallest balance first

Use the debt snowball strategy to attack your debt gradually. Prioritizing the debt with the lowest balance comes first, and you'll pay the minimum on all other bills. You'll move on to the next lowest debt once your low-balance loan has been paid off.

After you've paid off the first loan, start making payments on the next-smallest obligation with the money you were previously paying each month. You won't change how much money you spend toward debt each month, but you will start to pay it off more quickly.

3. Pay off your debts with the highest interest rates first

You should pay off the loan with the highest interest rate first, then move on to lower-interest debts. This will make repaying your debt easier in the long run.

4. Apply unanticipated income to your debt

It's simple to think of enjoyable ways to spend money when you receive an unexpected sum, such as going on a trip or purchasing the most recent model of smartphone you've been eyeing. However, it would be a better idea to spend your surprise income to reduce debt.

Don't see a financial windfall as "additional money" that you may spend at your whim. Reduce your debt and ultimately save money on interest by using inheritance, tax return, or job bonus.

If you want to swiftly pay off your debts, here are a few strategies to get some additional money as money seldom just appears out of thin air.

5. Obtain a personal loan to consolidate debt

You can save money over time by repaying your bills with a debt consolidation loan at a lower interest rate. With this repayment strategy, you may also consolidate many obligations into a single one, reducing the number of payments you must make each month to just one.

Find a lender prepared to offer you a lower APR than what you are presently paying while looking for a personal loan. Remember that your APR may be lower the shorter your loan period.

Similar to shifting debt to a balance transfer credit card, you may also consolidate debt by doing so.

Start with these 5 tips and give budgeting a shot. Any family or person must keep track of their expenses and budget just like any company to survive.

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