There is no magical way to get out of debt. But if you apply a few simple principles it is definitely possible.
The first step in becoming debt free is to consolidate loans wherever possible. Many people have a number of loans, all at different interest rates, and they don’t even know which of them have the highest rates of interest. If possible, get all loans under one umbrella. Although bank loans are more difficult to get than they used to be, some banks are still offering them, and rates of interest are low at present.
Pay off Your Credit Card
Credit card interest rates are incredibly high. These should be paid off first, before any other loans. Many people simply pay the minimum amount of each credit card, because they can. But if more is paid off, even just a little bit more, this can be the key to reducing debt. Progress is important.
Use Mortgage Savings to Pay Off Debts
Many people have found that with the low interest rates at present, their mortgage payments have gone down. It is tempting to use this extra money for treats and holidays…but don’t! If someone instead uses it to pay off loans, this will help them to become debt free surprisingly quickly. Again, pay off credit cards first, and then any other high interest loans.
Get Some Emergency Savings
An emergency can very easily drive a credit card bill up again, and everyone has emergencies once in a while. The thing to do is to get some emergency savings. Most banks are offering fairly good interest rates if a person can save regularly, so once their loan payments are reduced, they can open one of these, even if it is for only a small amount each month. This will quickly grow into a substantial nest egg.
The only real way to get out of debt and stay out of debt is to start controlling household and other expenses. The best way is to record everything one spends, and then look at ways that money can be saved. Although items such as rent, council tax, and transportation may not be alterable, some items can be reduced. It is important to get quotes for insurance premiums when they come up for renewal. Many people find they can save on small items such as entertainment and clothes without all that much difficulty. The savings may be small, but they add up in the longer term.
A combination of all of the above – consolidation of debts, paying off credit cards, emergency savings accounts, and controlling expenses – could get a person out of debt more quickly than they thought possible. The problems are partly in the mind, so everyone should start…now!