Debt can be stressful, especially if you have a lot of it. The good news is you don’t have to live with debt forever. Several strategies, such as debt consolidation, credit counseling, and budgeting, can help you get free of debt and work toward other financial goals, like buying a house, saving for college, or retiring. Read on to learn more about the different methods you can take to get debt relief.
1. Debt Snowball
The debt snowball method lets you focus on paying your smallest debts first. It can be a good option if you’d like to stay motivated and celebrate small wins. You repay your debts from smallest to largest until you’re completely debt-free. With this method, you still have to make at least monthly minimum payments on all your other debts and make all payments on time.
2. Debt Avalanche
With the debt avalanche method, you pay off your debt with the highest interest rate first and work your way down one by one to the debts with lower interest rates. This method is worth considering if you’d like to save as much in interest fees as possible. If you have a lot of high-interest credit card debt, for example, it might make sense. As with the snowball method, with this method, you still have to make at least monthly minimum payments on all your other debts and make all payments on time.
If you don’t track your spending, it can be challenging to pay off debt. With a budget, you can make the most of your income and ensure you have enough to put toward your loan and credit card payments. There are many types of budgets you may want to consider like the 50/30/20 budget, zero-based budget, envelope budget, and pay-yourself-first budget. You can find resources on how to set up each type of budget online.
4. Credit Counseling
Many nonprofit credit counseling agencies offer free or low-cost debt counseling. A certified credit counselor can offer debt advice, help you create a budget, provide you with educational materials on money management, and even design a debt management plan. In some cases, a credit counselor may be able to negotiate with your creditors to reduce your interest rates, waive late fees, or even negotiate a lower overall debt balance. It is important to do your research when finding a credit counseling agency, as some may have hidden fees and are not completely non-profit organizations. A good place to find a certified counselor would be with the National Foundation for Credit Counseling (NFCC), a non-profit organization based in Washington, DC with the goal of promoting financial health for all.
5. Debt Consolidation
A debt consolidation strategy means combining multiple debts into one loan, ideally with a lower interest rate than the debts that are being combined. If you’re overwhelmed with debt and prefer one, easy-to-manage monthly payment rather than separately paying several creditors or lenders every month, debt consolidation is the way to go. While there are several debt consolidation methods, a debt consolidation loan and a credit card offering a competitive balance transfer Annual Percentage Rate (APR) are popular options.
6. Find a Side Hustle
There’s no doubt the key to paying off debts is having more money at your disposal. You might want to pick up a side hustle to help you accomplish this. Making a few extra hundred dollars a month can go a long way in paying off your debts.
There are plenty of side hustles out there, such as driving for Uber or Lyft, walking dogs, delivering food with DoorDash or Postmates, babysitting and pet-sitting, and many more. You could also try freelancing on sites like Fiverr, Upwork, and other. Whatever side hustle you choose, make sure it’s something you enjoy so you don’t get burned out.
When selecting a side hustle to help pay off your debts, be sure to consider the time and effort you’ll have to put in, as well as the income potential. If it’s something that takes up a lot of time but provides little return, then it might not be the right fit for you. Keep in mind that you don’t need to make a ton of money doing your side hustle to make a difference in your debt payoff plan. Every little bit helps!
The Bottom Line
The best and quickest way to get out of debt depends on your unique situation. Consider how much debt you have, what will help you stay motivated, and what resources are available. Best of luck in your journey to a debt-free lifestyle.
Name: Keyonda Goosby
Job Title: Consultant
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