5 tips to get out of debt quickly

Sun, Jun 10, 2012

Financial Advice

We all have to deal with the debts at some point of our lives. Living with a debt is a headache and it may give birth to health complications like stress and anxiety. As such, we should make proper efforts to become debt free for a peaceful life. This post provides 5 useful tips to get out of debt quickly.

Analyze the total debt

The first thing to do is to make a list of all the debts and then calculate the total amount you owe. This is a common problem with people who have multiple debts. It arises because the person tries to ignore the reality and thus neglects the debt amount. If you want to live a debt free amount, you have to calculate the total debt amount first. An important thing to remember here is that you should list the debts in decreasing order of interest rates as it will help you to prioritize the important ones. It is always better to first pay the debts with higher interest rates.

Prioritize your Debts

The next thing that you are required to do is to prioritize the debts according to interest rates, paying capabilities and the type of the debt. Generally most of the debts are secured by some securities. It is believed that one should give the highest priority to the secured debts. This is because of the fact that not paying those debts on time can get you on the streets. Thereafter, the debts with higher interest rates should be considered. Finally, if you owe money to your friends and family, it should be given the last priority. This criterion is not compulsory and it depends from one individual to another. However, you must priorities the debts as it will help you to get rid of them.

Start paying your debt

This is the most important part and it involves taking action. Once you have analyzed the debts to pay, you need to pay the installments as per your plan. This requires a lot of commitment and you need to stick to your plans till you are completely debt free. Firstly, subtract the monthly expenditures (food, rent, health, etc) from the monthly income and then calculate the potential amount that you can pay for debts. Note that it is still potential amount as it will require you to cut down all the other expenditures made on luxuries.

Use your assets to pay down debt

Another method commonly advised by the financial experts is using your assets to pay for the debt. This includes cars, boats, jewelry or any other asset and can provide a good amount of money to pay for the debt.

Pay biweekly to pay down your down debt

You can also save a lot of money by paying weekly or biweekly. One precaution to take with this practice is to ensure that there is no penalty for prepaying the installments.

I hope this post helped you to understand the different techniques to get rid of debt quickly.

Sara Muler is a finance expert that provides free guest posts in her spare time. Visit http://www.loansforpeoplewithverybadcredit.net to learn more about her website.

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