Stop Dragging Debt Around With You: How to Pay Back Debt Fast

Are you sick of carrying debt with you wherever you go? When you have debts like a credit card statement that you can’t pay in full or bills that you’re not sure you’re going to be able to be make, it’s a feeling that you carry with you everywhere. It affects your purchasing decisions and even your social decisions. It can lead to spending more nights in, feelings of isolation, and anxiety when do go out with friends or family.

In addition to the cognitive effects debt has on you, it also holds you back from achieving bigger financial dreams. When you’re stuck in debt, you aren’t able to:

  • Save for your own retirement.
  • Save up a down payment for a mortgage for your first home.
  • Buy a new car.
  • Go on a dream vacation.
  • Go back to school or save up an education fund for your children.
  • Start your own business.

There are so many more financial goals that debt can stop you from pursuing.

Paying it all back can feel like climbing Mount Everest. It’s a long and challenging journey. In fact, it might be taking you too long. High-interest debt can leave you in a trap where you’re constantly paying off interest first and barely making a dent on the principal.

It’s time to learn about how you can quickly get out of debt so that you can move with your life and start thinking about bigger financial goals.

#1 Paying Off Debt the Smart Way

If you have extra income that you could put toward debt payments, you may just need a smarter way to pay it back. Financial experts recommend focusing on one debt at a time. Keep up with minimum payments on everything, but start putting more toward a single debt.

Where do you start? That depends on your goals. If you feel like you need motivation, pick the smallest amount that you owe. Once it’s paid off, move on to the next smallest. It can give you the momentum to make real progress. If you want to save as much money as possible, start with the most expensive debt. This is the one that comes with the highest interest charges. Paying it off first will free up more of your income to tackle other debts.

#2 Debt Consolidation

Interest rates are expensive. Credit cards can come with interest rates in the 20% range, while payday loans can cost as much as 47%. It can leave you floundering, paying off hardly anything except interest.

One way to give yourself some breathing room is a debt consolidation loan, where you take out a new loan to pay off all your high-interest debt. If the new loan has a lower interest rate, you can save money and make progress faster.

#3 Consumer Proposals

When paying off debt on your own isn’t feasible, and a lower interest rate isn’t enough to move the needle, a consumer proposal is a form of debt relief that will discharge you from a large portion of your debt without requiring you to sell any assets.

In a consumer proposal, you make a fixed monthly payment with no interest charges to your creditors for up to five years. You can be discharged from as much as 80% of the debt you owe, and if the majority of your creditors accept the terms of the proposal, they are all legally bound by it.

You can only get a consumer proposal with the help of a Licensed Insolvency Trustee. Talk to an LIT near you to discuss the pros and cons of consumer proposals.

You Might Also Like