When you have debts all over you for a long time, you are probably never in a good mood, and have forgotten what it is to be happy in life.
Or, wait a second! What is called a happy life again?? Does the phrase happy life exist in your wordbooks or dictionaries anymore, since the day you incurred big debts?!
Thats how bad, debts are.
They suck out every inch of peace and serenity from your life, and leave you all dry and burdened, both financially and emotionally.
Still, we need to show the very human tenacity and dedication, and fight these debts and take back the happy life we deserve.
In this post we will be going through some easy debt pay off strategies, which will guide you on your way to become debt free, and help you to achieve financial independence.
Thus, lets get the whole scene rolling then, shall we?!
Take a look at how old your debts are:
Not all debts need to be dug out and paid off.
Those, that are buried deep down under the soil of time, might have passed their Statute Of Limitations (SOL), and you might just not be aware of the fact.
A debt that has passed its SOL, does not have the same enforceability as before. A collector or creditor may still try to collect it from you, and file a lawsuit against you, but there are very thin chances of you losing the judgment to them.
Therefore, if you are having expired debts with you, then you should not rush to pay them off! Rather, take your time, and consult a lawyer and try for debt forgiveness by signing into an agreement with the creditor.
Figure out which debts need to be paid off fast:
Of all the debts you have, some are secured and some are unsecured.
Secured debts are those that have a collateral attached to them, which the creditor can take away from you, as a result of compensation for the debt, in case you start to default on the payments.
These debts are namely mortgages, car loans and all. They have their own fixed payment terms and conditions. Take for example, your home loan or mortgage (if you have any).
When you repay it fast, the lender will charge you a prepayment penalty! Hence, you should never rush in paying off these loans. Go along with the payment schedule set by the bank.
Next are obviously the unsecured debts or consumer debts:
These are the ones that you need to pay off real fast.
Unsecured or general consumer debts are credit card debt, payday loan debt, personal loan debt, and all that no have any asset or collateral attached.
They carry the highest interest rates in the debt market. Much higher than what a home loan or car loan would charge.
Keeping these debts for long with you, will only bring more penalties, and extra charges. Eliminate these debts with suitable debt pay off strategies, and good debt relief options.
What debt payoff strategies should you use?
Personalized DIY (Do It Yourself) debt payoff strategies are quite authentic and effective. However, you got to infuse a well structured budget, along with any strategy you plan to use. Otherwise it might be very difficult to eliminate debts all by yourself.
The two most common and widely implemented debt payoff strategies are, Dave Ramsays Debt Snowball method, and Debt avalanche.
With Snowball, you will be aiming to pay off the smallest debt first, by making extra payments for that debt, while keeping up with the minimum payments on the other debts.
Once this debt gets cleared, you will then shift the payment amount for this debt, on to the next smallest debt in line.
Repeat the steps till all the debts are gone for good.
Avalanche on the other hand, points out the debt, that has the highest interest rate. For this debt you will be making extra payments, so as to get rid of the debt as fast as possible.
Like in snowball, you will still be making the required minimum payments on your other debts. And, once the first debt is paid off, use its payment amount as an add-on for the next debt, that carries the highest interest rate in contrast to other your existing debts.
Now, as of a budget, you can start off with the basic 50-20-30, where you will put 50% of your monthly paycheck for debt payments, if you have too much of debts to pay off.
With the 30% of your salary you can carry on with day to day expenses. And, the other 20% you can build savings with, or punch it toward debt payments, or can even utilize it for daily expenses.
Do, whatever divisions you want, but your motto should be to become debt free as soon as possible.
Ultimately comes debt relief options:
Out here I will put down, the two most important debt relief options ever.
One is debt consolidation, and the other is debt settlement.
In debt consolidation you will be accumulating all your debts into one place, and then pay off this fat debt by making a single monthly payment.
Things can get lot easy if you are only having credit card debts with you.
You get the benefit of various credit card debt consolidation options, to choose from. You can either do a credit card balance transfer, or approach a consolidation company, which will help you to manage credit card debt seamlessly.
You can also take out a consolidation loan, and pay off all your credit cards at one go. Then you will have only this loan to pay off, which will definitely provide you with a lowered interest rate, as compared to the interest charges of credit cards.
On the other side of the coin, you are having debt settlement, where negotiations will be done to forgive significant amounts of your total owed debts.
Debt settlement is a complex process and you are advised to take help of a settlement company, to avoid complications.
I am bringing this post to an end. But, to keep in mind, all the points and debt payoff options discussed in this post can be applied only to unsecured or consumer debts.
Any type of secured debt, like equity loans, mortgages, car loans, and all, can not be paid off using the methods listed above.
Its better to consult a law firm, so as to modify or change the terms and conditions of your secured debts.
Hope this article was helpful up to some extent.
Have a happy and debt free life ahead. May you receive financial independence sooner than you expect!
About The Author
Andy Masaki is a blogger and contributor at Oak View Law Group. He is a debt expert and a member of several online forums where he shares his advice as well as tips to lead a financially independent life.
The views expressed in the Contributors section are not necessarily the views of Palma Financial Services, Inc.