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How to Pay Off Debt in 2024?

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Various factors may lead to debt, such as medical bills, job loss, unexpected expenses, etc. Over 55% of Americans can’t cover unforeseen costs of $1,000 and are compelled to seek extra funds to deal with the payments.

Once individuals borrow money from financial institutions, they often encounter challenges in repaying their debts. Our purpose is to help you avoid financial anxiety and additional fees with interest for late or missed payments. The article provides guidance on how to pay off debt in 2024 and create a repayment plan. 

Best Strategies and Tips for Paying Off Debt 

You can find numerous ways to consolidate or at least reduce debt, but many may seem overwhelming or unaffordable for you. What should you do in such a situation, and what options can you rely on? Below, you can find the best ways to get out of debt and start a new chapter of your financial life. 

#1. Assess What You Owe 

Understanding your current financial situation can help you pay off your debt or decide to use debt relief options if repayment is impossible. Analyze the relationship between your income and expenses, list out all your debts, and calculate how much you need to pay depending on the: 

  • Type of debt (student loan, personal loan, mortgage, credit card debt);
  • Interest rate and fees;
  • Monthly payment;
  • Lender; 
  • Total balance. 

All the mentioned details play a crucial role when you choose a way to pay off debt and create a plan.  Various kinds of debt require different approaches, so consider your specific type of debt carefully before determining the strategy. If you owe a $1,000 loan for bad credit, it is crucial to prioritize returning it promptly. Bad credit loans often save people’s lives in emergencies, but a late payment to a lender may result in extremely high interest rates. You should keep this factor in mind and assess your ability to return the funds on time when borrowing from a bad credit provider. 

#2. Adjust Your Budget

Debt consolidation always comes with certain inconveniences. To get money on interest payments and the overall debt repayment, you need to change your financial habits. The faster they will be changed, the quicker you will pay off the debt. 

We recommend you analyze your last month’s expenses and divide them into the following categories: 

  • Necessary expenses. There are costs that you can’t reduce or eliminate. They may include your rent payments, food, insurance, and others. 
  • Desirable expenses. This type of cost includes small things, like subscriptions or inexpensive travel. They are typically cheap and bring more comfort to you, and you would like to have them in your life. 
  • Unnecessary expenses. We often spend money on things we don’t really need. When it comes to consolidating the debt, determining these unnecessary expenses may be essential. For example, you can eliminate or reduce the costs of eating outside or using taxis if public transport is nearby. 

In addition to the previous options, you can sell your car or consider renting a room instead of an apartment, getting roommates, or even moving to your parents to save on rent. 

It is always unpleasant to eliminate things that make your life more comfortable and make you feel you can afford even unnecessary things. But now, you should concentrate on paying money toward debt consolidation. Remember that all these difficulties are temporary, and you can go back to your previous lifestyle after the debt is paid off. Furthermore, this period may teach you something: change your financial habits and understand what items you don’t really need. 

#3. Choose a Debt Payoff Strategy

Dealing with debt comes with a lot of stress, which significantly complicates the process. To pay down your debt faster and without anxiety, you should choose and stick to a strategy. 

Debt snowball method 

This strategy works like a snowball, as you pay the smallest balance first, regardless of the interest rate. Then, you return more significant debts to enjoy debt freedom after repaying the largest debt. This method is more about psychology than about math. It allows you to see your progress and enjoy small victories after every repaid loan. However, it may lead to high rates on the large outstanding debts.

Debt avalanche method 

The debt avalanche is based on making the minimum payment on all your debts while focusing on paying the debt with the highest interest rate first. Unlike in the snowball method, you will not see fast victories, but you can avoid having an extremely high-interest debt over time. 

#4. Switch Jobs or Ask for a Pay Raise

If you understand you can’t repay the debt fast due to your current salary, it may be the right time to talk with your boss about a pay raise. People are often shy about asking for such things, but the market is changing, and prices are growing. Explore how much other employers offer for the same position and discuss it with your CEO.

If your boss does not agree to increase your salary, try to find another company. Although changing something in life is always stressful, focus on the debt and how much you want to pay it off. 

#5. Start a Side Hustle 

Another way to increase your income and become debt-free sooner is to find a second job. Now, it is the most possible ever. You can try freelance work, such as copywriting, web design, or virtual assistance. Platforms like Upwork and LinkedIn are perfect places for looking for remote job offers. 

If working from home is not your option, consider taking several shifts weekly as a waiter at a local restaurant. The selection of part-time or online jobs is huge, so you will definitely find something for yourself. 

#6. Consider Refinancing or Consolidating Your Debt

Returning a large amount of debt can feel overwhelming, especially in the case of multiple loans. In such a situation, you can try to consolidate or refinance your debt. 

Debt consolidation

If you like organization and don’t want to repay multiple loans at the same time, you can consider debt consolidation loans. With their help, you can combine your debts into one single payment with lower interest and focus on its return. 

The most common ways to consolidate debt include a home equity line of credit and transfer balances. The first option allows you to get a lower rate if you have equity in your home, while the second one enables you to use a low balance transfer rate to move down high-interest cards. 

Balance transfer

People with good credit can benefit from balance transfer credit cards. From one or several cards with high interest, you can transfer your balances to another credit card with a lower interest rate. As a rule, you need to repay the funds within the promotional period, which is typically 12 to 21 months. 

#7. Forget about Credit Cards

Using credit cards always comes with a risk of additional debt. If you want to repay your debt within the minimum period and prevent new debts, always pay your costs by cash or debit cards. In addition to the lack of interest and fees, these options will help you avoid overspending and making impulse purchases.

However, emergencies may occur to everyone, and here, a credit card may be the right solution. You can use it to pay high medical bills, car or home repairs, utilities, and other unexpected expenses. 

#8. Pay More than the Minimum

An excellent way to get out of debt quickly is to pay more than the minimum balance. Take a look at your credit card statement to see the requirements. If you pay the minimum, returning the debt will take much longer and will come with more interest. Therefore, try to pay a larger amount than the required minimum. 

Bottom Line: Best Ways to Get Out of Debt

Paying off debts, such as credit card balances, personal loans, or student loans, is a real challenge, especially if you can’t return the money within the set terms. In this case, be prepared to overpay due to higher interest and extra fees. Creating a repayment plan is necessary to determine how and how much you should put toward debt. Remember that the amount you’re paying each month should not lead to taking new loans and increasing the amount you owe. Use a debt payoff calculator to determine the amount you plan to pay to a lender regularly. 

FAQ

What is the difference between secured and unsecured debt?

Secured debt is a loan that is taken with collateral. Such loans often do not require a good credit score, as a lender can keep the valuable asset if a borrower does not pay off the money.

Unsecured debt is a more risky option for a provider, as it does not require collateral. Therefore, lenders pay more attention to the borrower’s credit score. 

How can I track my debt repayment? 

You can track your debt reduction in mobile apps, spreadsheets, or by writing the process of following your debt management plan on paper. 

How does debt impact my credit score? 

Debt can both improve and hurt your credit. Making on-time payments toward your debt can positively impact your credit report. At the same time, a high credit utilization ratio and late or missed payments can decrease your credit.