The Best Way to Repay Debt
You’re not the only one who owes money on student loans or car loans. According to the Federal Reserve, the national total household debt now stands at over 14 trillion. At this point, you can say that worrying about debt has become a national epidemic.
However, many people believe that debt is just part of everyday life. Are you responsible for your car monthly payments? How about an upside-down car loan? It is easy to get one of these too.
Is it possible to live a debt free life?
When you speak about living a debt-free lifestyle, people will naturally look at you as if you have lost a few screws and bolts.
Your past may be full of debts. Did you remember that stupid spring break trip that you bought with your high-interest credit cards? You’ve probably already paid three times for the trip.
The good news is that you don’t need to make debt payments to your past. Stay with us, and we will show you how to get rid of your existing debt forever.
What is Debt?
Debt is any amount you owe money or money you receive from someone else. It can be credit cards debt even if they are paid off each month. Student loans, mortgages, and personal loans are also other types of debts.
A quick look at IRS and government debt
Bills such as electricity, water, and utilities are not considered debt. These are your regular monthly expenses. The same goes for home and car insurance, taxes as well as groceries, and childcare.
These routine expenses can quickly turn into debt depending on how you pay them. This means that if you use your credit card to pay for utilities, groceries, and electricity, you are in danger. You can quickly build up credit card debt if you miss one credit card payment.
What about your house? Although your mortgage is technically a form of debt, it’s not the one we will give you any problems about. This is as long as your monthly take-home income doesn’t exceed 25% and your mortgage rate stays at a fixed 15-year rate. The personal loan is quite affordable.
If you owe money to someone and must make payments to them, you are in debt. You have no legal right to stay in debt. As much warning as possible to your debtor. You can become enraged and use everything you have to combat the situation. Take a look at your debts first.
What amount of debt do you have?
You don’t have to hide your face in the sand anymore. It is time to confront the truth and take action! It’s not going to look pretty adding up your total debt. Let’s get rid of the Band-Aid. Are you ready?
Once you know your total debt, it is possible to calculate how quickly you can pay it off. A debt snowball calculator tool makes it easy to add all your debts and see how quickly you can eliminate them.
This proven strategy will help you not only pay off your debt but also get rid of it permanently.
These Debt Reduction Strategies Don’t Work
It is not easy to pay off your debt. Although we are aware of all the hype surrounding quick ways to get rid of debt, it is possible that it may be too good to be true. Let’s take a look at the various options available and explain why you should avoid them.
Consolidation of Debt
With a personal loan or a credit card, you may consolidate your debt and decrease your interest rate, allowing you to pay more money toward your credit card balance.
Debt Consolidation. This loan combines all of your credit card bills into a single monthly payment. At first, this appears to be a good idea. It is feasible to do so until you notice that your loan’s term lengthens.
This means that you will be in debt longer. The low interest rate that seems so attractive right now? It tends to go up over time, too. Extending the time it takes to pay off debt plus adding interest equals a terrible deal.
Settlement of Debt
The dark underbelly of financial markets is the debt settlement company. Avoid this option. These companies will ask for a fee, then promise to negotiate with creditors to lower your debt. They will usually just take your money and make you responsible for your debt. It’s a hard one.
You should never borrow money from your 401(k), to pay off debt. There are penalties, interest fees, and taxes that could be imposed on the withdrawal. It’s not worth the effort when you consider all of that. You want that money to be used for your retirement, not for past mistakes.
Home Equity Line of Credit
Borrowing money against your house is not a smart idea. If you don’t pay the loan back on time, your home could be at risk. No! It is not worth taking such a big risk. It’s best to forget about it and not do it.
These types of debt reduction options, while they may seem promising, are unable to solve the root cause of your money problems. These options won’t help you solve the root cause of why you got here.
The Smart Way to Pay Off Debt
Focus on paying off the debt with the highest interest rate first, while making minimum payments on the loan with lower interest.
Nonprofit credit counseling agencies can assist debtors in creating a debt management plan. An agency will negotiate with the corporations to whom you owe money on your behalf, arranging for lower payments, fair repayment arrangements, and potentially debt forgiveness.
Never use debt again
You can’t take it seriously. Do not do it again. If you end up in debt again, it will be a waste of effort. This approach is not going to work if you believe that debt is stupid
Living on a budget is possible
It’s possible to avoid debt using a budget plan. You must create a budget with zero-based credit card spending. Tell each dollar where it should go if you want to win with money.
Although your first budget may seem a bit shaky, don’t lose heart! It can take three months to get into a routine and work out all the kinks. It’s not easy, but it is worth the effort.
The debt snowball method is a good option
Once you have your budget in place, it is time to begin paying down debt. The debt snowball method is the best way to get rid of your debt. This is a way to build momentum, as you pay your debts in descending order.
How it works:
- Your debts are listed in order of the smallest to greatest balance. Don’t forget to pay attention to the interest rates.
- Spend as little money as possible on the smallest debt.
- Get serious about getting rid of that debt as soon as possible
- Add the amount you paid on this small debt to the amount you are paying on the next-smallest
- Keep going until you have paid off all of your debts
Follow the proven plan to make your money work
You can now eliminate your debt and take control of your finances. Live for the future, not your past.
Oak Park Financial can help you get rid of debt faster. It includes financial aid tools, which will track your progress to help you live a debt free life. This plan has been used by nearly 6 million people to help them a budget, save money and get rid of all their debt.
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