Top 5 Ways To Clear Your Debt

A lot of people now are struggling financially because of the ongoing economic crisis. One of the culprits is debt, both on the national as well as individual level. If you have too much debt, these five tips can be implemented to totally clear your debt.

Get rid of your credit card

Credit cards were designed not only for convenience but to provide extended purchasing power for cardholders. But that added capability to spend is essentially translated to debt. If you’re using your credit card, you’re adding to your borrowings with each use.

In theory a controlled use of credit cards should be fine in moderation. However, many cardholders find that the availability of funds encourages overuse. Instead of using credit cards, you should learn to revert back on paying cash. Reverting to cash should help you clear your debt even if it’s just from time to time.

Pay more than the minimum to clear your debt

You might think that your credit card issuer or other lending companies are gracious enough because they are allowing you to pay only a minimum percentage of the total amount due from you. This is not true. Although you are paying a minimal amount every month, it won’t do much to help clear your debt. This is because the remaining balance will still cost you a certain percentage of interest which will again added to your next month’s bill. So, if you are trying to pay-off or at least reduce those compounded debts, your monthly payments should be kept above the minimum.

Create and adhere to a financial budget

The main reason behind the creation and adherence to a budget is for you not to spend more than the amount you earn. After preparing a budget, you will notice that most of the ‘luxury’ or non-essential items who are fond of purchasing before shall be eliminated. And if you really want to purchase some of these luxuries, you should first learn to save. Budgeting can be done mentally. However, writing your budget is recommended to visibly track your spending activities. This gives you a visual cue to clear your debt.

Augment your income

If you are struggling on paying your debt with your current salary or income, then you should find other means of augmenting or increasing the monthly earnings you get. You could do part-time jobs or businesses. The bulk of additional income should be dedicated to clear your debt.

Start with the smallest and short-term debts

Examples of petty loans which have a short-term maturity date are payday loans, cash advances, personal loans etc. You should start paying off these smaller and short-term debts first than the larger and long-term ones. Why? Because short term debts especially those unsecured are the most expensive in terms of interests and penalties. A payday loan for example can cost you around 10-20% interest for just a short 1 month period while a vehicle or house mortgage is only at 6 to 12% per year.