Become Debt Free: 4 Things You Can Do
When it comes to your finances, taking action now could put you in the best position and hopefully even mean a debt-free year. There are lots of options available that can make paying off debt easier and faster. If you’re ready to get out of debt, follow the steps below to reduce your debt and get on your way to becoming debt free.
How to Become Debt Free: 5 Things You Can Do
Debt Myths
There are several common myths and misconceptions surrounding debt. It’s essential to debunk these debt myths to make informed financial decisions. Some common myths about debt include:
- All debt is bad: Not all debt is inherently bad. While high-interest debt, like credit card debt, can be problematic, some types of debt, such as a mortgage or student loans, may be considered investments in your future.
- Your family need to pay off your debt when you die: Your family will likely been to settle any debts with money from your estate (your estate = your home, savings and investments). But if you do not have enough in your estate to cover your debts this isn’t passed into you family.
- You need to be debt-free before investing: Waiting until you are completely debt-free before investing may not always be the most financially sound decision. It’s essential to strike a balance between paying off high-interest debt and starting to invest for the future.
- More income means you can handle more debt: A higher income doesn’t automatically mean you can handle more debt. It’s important to consider your overall financial situation, including expenses and future goals, before taking on additional debt.
- You can’t negotiate with creditors: Many people believe they have no power to negotiate with creditors, but in reality, many creditors are willing to work with individuals facing financial difficulties. It’s worth reaching out to discuss your situation and explore potential solutions on your journey to becoming debt free.
- Bailiffs can force entry into your home: If bailiffs are collecting debts they may force entry into your home, but this is very rare. If you have allowed bailiffs into your home previously and signed a ‘controlled goods agreement’ then they are allowed to enter your property.
Prioritise your debts
If you have several debts, you might be feeling overwhelmed. Prioritising and working out which debts to pay off first will help you save money and clear your debts faster.
Prioritise debts that carry the most serious consequences if you don’t pay them. You may have smaller debts that could lead to very serious problems, for example your mortgage, rent, tax, bills or court fines. Prioritise paying off these debts first to ensure that you don’t lose your home, get fined or receive a court summons.
The same principle applies to businesses. Unpaid invoices or overdue accounts can have severe knock-on effects, making it difficult to pay staff, suppliers, or taxes. Seeking help through Commercial Debt Collection can be an effective way to safeguard your business’s financial health.
After paying off any debts that could lead to serious consequences you should next look at the largest debts with the highest interest rates. Pay as much as you can afford without breaking the terms of the credit agreements you may have. Once you’ve cleared your most expensive debt, move on to working on your next most expensive one.
It’s important to always respond and answer a debt lawsuit. You do this by filing official paperwork with the court.
Consolidate debt
Having lots of debts in different places can be confusing and expensive. You have to remember to pay each of these companies every month. And lots of different interest rates can mean that you’re paying over the odds. One of the best ways to pay off debt fast is to consolidate!
For consumers struggling to keep up with multiple unsecured debts, a debt settlement program may be another option worth exploring as part of a broader strategy for regaining control of their finances.
Consolidating is where you take out a loan or credit card that covers the amount of all your balances. By doing this, everything you owe is in one place, this makes it much easier to manage. You can find companies that give you an interest free introduction period too meaning that you’re not paying interest on top of your debt.
Alternatively, you may want to pay down any secured debt you own against any assets (property selling, for example).
End Credit card debt with a 0% balanced transfer
Credit card debt can quickly mount up if you don’t pay your card off in full each month. The first step to sorting out your debt is to stop spending money you don’t have. Most of us get trapped in a cycle where we pay off some of what we owe, but then spend right back onto them again. Cut up your credit cards and no longer see these as a way of accessing cash.Â
Reduce your outgoings, review your bills, and quit non-essential spending. Every year I look over my bills to see if I could be getting a better deal; now that you’re taking the first steps to becoming debt free now is the perfect time to see if you could cut the cost of your monthly bills.
The average interest rate charged on a credit card is a massive 18%. Transfer your balance to another credit card with a 0% balance transfer offer. These cards offer a period in which no interest will be charged on your debt, meaning that every penny of your repayments goes towards reducing the size of what you owe. But make sure you pay off your debt before the 0% introductory deal ends otherwise you’ll start to be charged interest on that too.
However, 0% balance transfers are usually only an option for those with a good credit score. If you’re not eligible for a 0% deal, look to get your interest rate as low as possible.
Speak to a debt charity
A debt charity could negotiate a reduced payment plan with your creditor(s), and can even have interest frozen making it much easier to pay off the balance. When debt is mounting, this is the best way to get things back under control.
5 Debt Charities That Give Free Debt Advice:
- StepChange
- Citizens advice
- National Debtline
- Christians Against Poverty
- Debt Advice Foundation
People who are in debt are often the targets of scams so please do make sure that the debt charity you choose to get advice from is a reputable company (like the ones listed above).
Earn extra cash
Finally, any other money you can earn on top of what you already get can go straight towards your debt. Offer to work overtime at your job, look for an extra part-time role, or start a side hustle. There are lots of ways to add to your income such as taking part in surveys or market research.
Most of us have items at home that we no longer need or use, selling them can help raise money to pay down debts. Selling old mobile phones, tablets and laptops can bring in good money. And there’s a market for antiques, jewellery, and clothes. Sell on places like eBay, at boot fares or Facebook marketplace to generate some quick cash.
I share some of my favourite side hustles across this website, but it’s worth exploring multiple options to see what suits your skills, time available and interests.
More Tips to Help you Become Debt Free
Any cash that you can raise from an item you don’t need can be paid towards debt. Here are some more ideas for increasing your income and achieving your debt free goal.
10 Ways To Boost Your Monthly Income
How I Earned £1000 From Home In 1 Month
Appen: Work From Home And Earn Money Online
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