I don’t like to talk about debt because for me getting into debt is like committing a sin especially if this is credit card debt. This is exactly the opposite of achieving financial freedom. My family and I previously experienced a financial crisis and we don’t want to experience that again. But don’t get me wrong as some businessmen do take advantage of business loans as it helps them grow their businesses faster.
Before we talk about the strategies on how to pay off debt quickly, let me first identify the commonly available loans:
- Credit Card
- Loan from Private Lenders
- Car Loan
- Housing Loan
- Business Loan
- Loan from a relative or friend
And before you avail a loan, make sure to ask the following questions:
- Do I really need it?
- Can I get a low interest rate?
- Can I pay the monthly interest and principal?
- How long can I pay?
- Do I still have excess funds for my other needs after servicing the loan?
If your answer for the 5 questions are all yes, then go ahead and avail a loan. Now, make a plan on how to get out of it quickly and here are some strategies:
- Spend less and save more. Be conscious of your monthly expenses make sure that you spend within the budget and if possible, spend less than your budget. In this way, there will be more excess funds to pay off your debts. Remember that you want to lower your interest costs. So if you are paying more than your required monthly principal you will surely get out of debt fast.
- Set up a debt payment plan. Make a list of all your debts, identify how much is your balance and also which one charges the highest interest rate. Prioritize the one that charges the highest interest rate.
- Always be on the look-out for lower interest rates. Since there is a pandemic, our government has lowered the benchmark rates. You can take advantage of this and consolidate all your debts into one lender for easier monitoring.
Do strategies 1 to 3 every month.
Now once you have paid off your debts, you already have the habit of spending less and saving more. Continue doing that and this time, instead of paying interest to lender, you pay yourself interest by investing your extra cash and making it grow. You are now well on your way to financial freedom.
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