How to Pay off Debt Faster and Live Debt-Free
- Rukevwe Erakpotobor
- 1 day ago
- 4 min read
You cannot wish your debts away; you either put effective steps in place to sort them out or bear the consequences of failing to repay them. In retirement, it gets even harder to sort debts because you're not actively working, and your pensions already serve a purpose.
How can you manage those outstanding obligations without compromising your quality of life? You might have considered drastic actions like hurriedly selling assets and taking loans to offset the scale.
However, there are many healthier ways to manage and settle debts and ultimately live debt-free. If you’ve been wondering how to pay off debt fast and sort your backlog, this article will set you on the right path.
How to Pay Off Debt Fast
What Do You Owe?
Start by identifying and accepting what and who you owe. If your debt is fragmented, say you owe multiple people different sums, you must organize them. You can do this by order of priority; perhaps those due sooner or heavier debts would come first.
Your detailed list of all your debts should outline who you owe, the outstanding balance, the interest rate, and the minimum payment. This will give you a clear picture of your financial obligations and the best ways to approach them.
Choose a Repayment Strategy
There are many ways to approach sorting debts, but it all boils down to which is most feasible. Assuming you had no urgent pressing debt to sort, you can focus on those with the highest interest rate first while making minimum payments on the rest.
Once the highest-interest debt is paid off, move on to the next highest rate. This strategy is called the debt avalanche. A direct alternative focuses on the smallest balance first. You could also consider financial consolidation as a strategy to sort out debt.
Debt consolidation simply means taking out one new loan to pay off several existing debts. This strategy can simplify your finances by allowing you to manage just one monthly payment and possibly reduce the cumulative interest burden.
However, you should be mindful of fees so you don’t accrue more debt in the quest to settle existing ones.
Create and Stick to a Budget
To settle debt, you must be prudent with your spending. Review your monthly expenses to determine extravagances you can cut back on and redirect those funds toward debt repayment.
Also, try to map out a spending plan for fixed periods; this could be long- or short-term. Now, adhering strictly to your budget may pose a challenge, but it's most definitely achievable. You can also get accountability partners or use tools to track your spending habits.
Increase Your Income
Increasing your income is a very obvious but effective strategy. You want to consider taking on a part-time job, freelancing, or using your skills to generate extra income. Side gigs can add up quickly when you direct them all toward paying down debt.
You can also declutter your space and sell items you no longer need online. This can provide an immediate cash boost that you can apply toward clearing your debt.
Consider Professional Help
Contact the people you owe and see if you can negotiate a lower interest rate. Creditors are sometimes willing to work with borrowers if they think it increases the likelihood of repayment.
If you’re struggling, ask if they are open to more flexible payment plans to temporarily reduce your financial burden. Credit counseling services can also help negotiate with creditors and create a debt management plan if negotiating is overwhelming for you.
Avoid New Debt
You can't continue to incur more debts when you have a backlog of debt to clear, or you’ll never truly be debt-free. As much as you can, try not to borrow more money while you’re paying off existing balances. This might mean temporarily limiting how you use your credit cards.
And in cases where you absolutely have to take a loan, do it strategically by:
Understanding why you’re taking the loan and the terms attached to the offer.
Avoiding predatory lenders like loan sharks.
Giving yourself a timeline to pay back and sticking strictly to the plan.
Never borrowing more than you can realistically pay back in worst-case scenarios. In most cases, you should have a plan to earn enough to repay.
Conclusion
Being in debt can be a heavy burden that restricts your ability to live freely, make confident financial decisions, and plan for the future.
However, the path to living debt-free may require you to make uncomfortable decisions like cutting down on expenses. While it's a long, bumpy ride, it is achievable if you have the right strategy and discipline.
The tips in this article are a great starting point, but you may need expert advice for more efficiency. Don't forget the Oak Pensions team of financial experts via www.oakpension.com for everything relating to your retirement account.
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