How to Get Out of Debt

Debt sounds like death and in times of high interest rates it has the same effect. Debt is like a slow poison which kills you gradually and if you do not pay attention to it, in the end the result of it can be catastrophic. Before knowing how to get out of debt one must know what is debt, well Debt refers to that borrowing on which a person has to pay interest regularly and on maturity of debt you have to pay principal amount to the creditor. Debt is a vicious circle and if you are one of those who is trapped in it than to get out of that vicious circle you need to be fully prepared to follow strict finance discipline. Given below are some of the steps which help you in getting out of debt easily –

5 Steps to Get Out of Debt Easily

Pay Installments on Time

The first and foremost step is to pay the installments on time and include more principal amount in installment and less interest because people keep paying interest without thinking about repaying principal amount which results in principal loan being intact and therefor the period of loan gets extended.

Avoid Unnecessary Expenditure

You should avoid unnecessary expenditure and divert that money towards settling of debt because your holidays, expensive cars and other such things can wait. It is always better to settle the debt and then go for such extravagant expenditure because when you are in debt you will not enjoy all this luxury things because at the back of your mind there will be always that thought that I have to repay my debt.

Increase the Sources of Income

One should try to increase the sources of his or her income so that debt can be repaid easily and quickly. However it does not mean that you resort to unethical ways of earning money but one can certainly improvise it. For example if you have bought a home by taking home loan and rent is higher in that area than one can give his or her house on rent for 2 or 3 years and move to other area where rent is low, by doing so you can use that money to repay your loan.

Do Not Take Another Loan

One should never take another loan if you are already having one because it will only compound the problem and you will find yourself in debt till you die. The right way is to pay first loan and then if you want than you can take the second loan.

Pay loan with Highest Interest Rate First

If you are one of those who have 2 or 3 loans than you should plan the repayment in such a way that debt which is having highest interest rate should be paid first and then other loans should be paid.

Well above steps can help you in getting out of debt, but the best advice one can give to anybody is if you are one those who do not want to earn for banks or credit companies but for yourself than stay away from loans unless it is a situation where loan is the only option.

1 comment… add one

Leave a Comment

Related pages

bill discounting without recourseplr rate of sbisubstitute and complementary goodsmarket skimming examplepassed adjusting journal entrywhat is marginal costing in management accountingmerits and demerits of atmwhat are the advantages and disadvantages of a command economydefine shareholdingmateriality conventioncharacteristic of monopolistic competitiontariff vs quotainternational joint venture advantages and disadvantagesprogressive tax advantagesexample of law of diminishing returnsdupont system analysisplanned economic system advantages and disadvantagesadvantages of venture capitalistswhat is the difference between shares and debenturescharacteristics of socialist economic systemcarriage outwardswhat is a decentralised organisational structuregaar meaningadvantages and disadvantages of delegationadvantage and disadvantages of social mediadisadvantages of cash flow forecastaccounting for unearned revenuedisadvantage of advertisementwhat is idle time in cost accountingdisadvantages of industries wikipediaadvantages and disadvantages market economyfull convertibilitywhat is a floating currencyjournal entry for capital accountconsumer nondurable goodsinvestment appraisal methods advantages and disadvantagesunitary elasticity of demandcapm model assumptionscost oriented pricing strategydifference between job and process costingcomparison between capitalism and socialismexplain the difference between fixed and variable costsmixed economic system characteristicswhat is cash flow and fund flowbranding advantages and disadvantagesdisadvantages of a bank loanexamples of skimmingdefine securitizedaccounting entry for unearned revenuesole proprietorship features advantages and disadvantageswhat is meant by fictitious assetsimportance of horizontal analysisgaap full formperfect competition advantagesautocratic advantagesdistinction between capital and revenue expendituremateriality accounting principleimportance of capital budgeting pdfcreditors turnover ratiodisadvantages of slumsdisadvantages of perfect competitionpositives of urbanizationthe balance in the prepaid rent accountadvantages of industrial agriculturedefine conglomerate mergertrial balance meaningadvantages and disadvantages of communismunbilled revenue journal entryadvantages and disadvantages of lifo and fifowhat is an indirect quotationdistinguish between trial balance and balance sheetoutwards definitionexamples of monopolistic competition companieshow to fill out a withdrawal slip