The average American owes around $38,000 in personal debt. Of that number, around 25% consists of credit card debt. The debt epidemic has gotten so bad that 2 out of 10 Americans spend between 50 and 100% of their monthly income on debt repayments.
If these statistics sound familiar to you, you obviously aren’t alone. But, that doesn’t mean you are destined to stress about your debt overload for the rest of your life.
Keep reading to discover top tips on how to become debt free quicker than you think.
1. Use the Snowball Method
If you’re interested in becoming debt free fast, you need to embrace the Dave Ramsey lifestyle.
Dave Ramsey is a financial guru who has crafted a series of “baby steps” to help anyone gain financial security. The very first baby step is to save $1,000 in a starter emergency fund. The second baby step involves paying off all your non-mortgage debt using the debt snowball method.
The method works by first listing your debts in order from smallest to largest. Then, each month you use your money leftover after you pay your basic expenses to pay an extra amount on only your smallest debt.
After you pay off your smallest debt, you then focus on your next smallest debt. The idea is that your motivation and the money you can put towards paying off debts will grow, like a snowball, quickly.
2. Try Debt Consolidation
Wondering how to get out of a financial hole? It can seem impossible when your monthly debt payments are only addressing a fraction of the interest.
Many credit cards and personal loans have extremely high-interest rates. This makes debt consolidation one of the best tips to pay off credit cards.
Debt consolidation is the process of gaining a personal loan to pay off your outstanding debt. Then, you only have one monthly debt payment which often comes with a much lower interest rate. Companies like debthunch understand that getting out of debt is challenging and make their debt consolidation loans easy to get.
3. Attempt to Settle Your Debts
Getting out of debt on a low income involves some creativity. One of the things you can attempt to do is settle your debts. This method works best if you have a lot of medical debt.
To do this, you need to have a decent sum of cash on hand. Then, call up the company that is handling your debt. Explain that you’re a low-income earner and wish to settle your debts.
Many times, people with low incomes won’t end up paying their debt at all. This means that companies may take an amount of cash that’s lower than your actual amount owed because it guarantees at least some of the debt is repaid. The remaining amount of your debt is then written off.
Now You Know How to Become Debt Free
Using these tips, you now know how to become debt free, regardless of how much money you make.
While it may seem like an impossible task, with a little work, you can gain control of your financial future. Reduce your debts through the snowball method, debt consolidation, or debt settlement.
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