If you want to become debt-free, you must work toward clearing your loans.
Millions of Americans are living with debt, with a recent study showing that the average household in the nation has credit card balances of over $16,748. Debt is brought by so many things, including education, unexpected bills, lifestyle costs and home expenses.
But living with debt should not be considered to be normal — and it is possible to get out of debt.
Regardless of the amount of debt you have, it is paramount to be careful when planning to pay your debts. With consistent payments, it is possible to live a debt-free life and, at the end of the day, focus on better financial goals.
When you do not have debt, you can easily save for a car or go on vacation. Here are some simple ideas to assist you.
Make a plan
Making a plan is one of the most crucial things in clearing your debts. You must contact your lenders so that you know the exact amount you owe. Ask the lender the time of the month you should be paying the loan and any penalties if the money is not paid on time.
Different lenders will set different requirements, so make a plan that suits your lenders and your budget. The plan will only be successful if you decide to stick to it.
How to pay off student debt
A recent study shows that student loan debts are becoming a crisis. Follow these steps to clear your loan faster:
- Visit the prestigious National Student Loan Data System and calculate how much you should pay.
- If you have multiple student loans, refinance or consolidate them to make things easier. This is also a great way of getting a better interest rate.
- Work on increasing your income and cutting down your expenses so that you can have more money to pay the loans.
- Always pay at least the minimum amount on time.
- If you can, choose to work in a state that does not charge income taxes.
How to pay off a personal loan
The process of paying a instant personal loan is completely different from paying credit card debt. The terms and conditions vary in all these loans.
Follow these tips to be on the right side:
- Ask your lender about the terms of the loan, interest rate and the options of making more payments on the loan in question. Never forget to inquire about the penalties.
- Ask your lender to give you a lower and reasonable rate.
- If possible, make bi-weekly payments so that you can clear the loan before it is due.
How to pay off back taxes
Unpaid taxes can completely ruin your financial life. Use this advice from the experts:
- Check the amount of unpaid taxes online so that you are sure of your balances.
- If you realize that the amount is low, consider paying it online using a low interest rate credit card. Use the IRS website when making the online payment.
- Consumers who are able to pay their taxes in one hundred and twenty days can ask for an installment agreement that is offered online. This is a great way of avoiding penalties.
- If you realize that you are among the taxpayers who are struggling with tax balances, consider checking if you can qualify for the Fresh Start Program.
How to clear credit card debt
Most Americans do not know how they can clear credit card debt first. A large number of people now consider credit cards to be part of their budget.
When paying credit card debt, the interest rate plays a crucial role. Here are simple tips to use:
- When you acquire a personal loan at a lower rate, pay off the credit card debt at once.
- Consider the snowball method. This methods state that consumers should pay the card that has lower balances so that they can clear the smaller debts faster. To make things better, pay an amount that is higher than the amount due.
- For people with an excellent credit score, it will be important to get a card that has little or no interest rates then transfer all your balances to the new card.
Bi-weekly payments
Submitting your payments twice a month is an effective way of clearing loans. This will work better compared to the regular monthly payments that will take longer.
You will also realize the following:
- The accumulated loan interest will be less compared to the people who pay monthly because the payments are applied more times.
- You will have more payments. There are 52 weeks in a year. Individuals who pay their loans bi-weekly will have made several extra payments.
- You will shave off some months from the loan duration.
Before you start making the bi-weekly payment, financial experts say that it is paramount to talk to your lender. Some lenders might decide to penalize you if you clear your loan early or make some extra payments.
Find extra money
If you want to clear any outstanding debt, it is crucial to look for ways to earn some extra money so that you can have enough to clear your loan.
Use your extra income to pay the loans instead of spending it on luxury activities. Paying your loans in time plays a crucial role in growing your credit score.
Photo by Ariel Lustre on Unsplash
