Affording debt with a good salary is always good until you realise, it's too much debt now.
Debt can accumulate faster and get out of control before you know it.
So today I want to show you the best strategies to track debt and get out of it fast.
Let's get started.
Proven Strategies to Get Out of Debt
Having a lot of debt can negatively affect your life.
You can't afford certain things to buy cash and via credit, because lenders assess your debt to income ratio before anything else.
1. List Down Existing Debt
The first step in cutting down your overwhelming debt is assing and acknowledging the existing debt.
Write it down in your journal or spreadsheet, which the exact amount you still need to pay off. Please include everything from your student loans, credit card debt, car finances to your bond or home loans.
Don't forget other bills, which aren't debt.
This strategy will help you easily navigate your overall debt and understand which to tackle first.
Now that you have a complete list of your debt, it's time to take action.
2. Stop Taking More Debt
Your first action plan is to stop accumulating debt under your name.
This strategy is only meant to slow you down and will not take you out of debt.
I understand life happens with unexpected financial expenses but please always try to find other means instead of taking more debt.
Look after your temptations to use that credit card and overdraft on your bank account.
3. Use the Debt Snowball Method
The most popular method for getting out of debt fast.
Pay a little extra into your debts, to reduce interest rates.
Remember, interest on any debt is calculated every month, so if you pay less, you'll end up paying longer for the debt.
From your list of existing debt, you'll start paying down the lowest debt, with extra money every month. And pay minimum installment toward the rest of your other debt.
The Snowball method will help you tick and remove debt off your list.
4. Start Paying Cash
All your debt payments are probably on debit order - right?
That's awesome because you'll never miss installments and negatively affect your credit score.
So for other bills such as doing groceries, you must pay in cash.
It's easy to spend more swiping your card, than when you would pay with cash.
5. Request Settlement
Some lenders allow you to settle a debt earlier than the agreed terms without penalties.
It's an opportunity for many to pay less and save on the interest of the loan.
For example, your total car loan may be R77,000.00 to repay in normal terms but the actual debt could be about R63,000.00.
So if you settle the debt today, you would have save about R14,000.00 on interest.