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.