The U.S. Census Bureau and the Federal Reserve recently released joint data regarding the situation of consumer debt in the country. According to the report, total outstanding consumer debt stands at around $3.4 trillion with average household credit card debt totaling $16,061. It is no wonder then that most household owners have complained about debt repayment being the major cause of stress.
The First Law of Holes
Well, the first law of holes is that when you find yourself in one, you should stop digging. If you are in debt, the logical solution is to stop borrowing, but this is easier said than done. Most people find themselves sinking deeper into the debt abyss to the point of losing valuable assets and filing for bankruptcy.
However, there are some smart strategies you can use to avoid this pitfall. Take a look at some of these:
1. Try Out The 0% Balance Transfer
High-interest rates are like a yoke to borrowers. You end up repaying a debt for years yet most of this money is eaten up by the interest. However, you can transfer your debt to 0% interest credit cards to give yourself some breathing space. Check the longest introductory periods in the market and use them to get a better deal. This is a proactive strategy where you have to do your research and make sure you repay the minimum amounts in time.
2. Create Debt Strategy
You can only manage what you know and this is why you must take time to evaluate your debt before coming up with a repayment plan. It is important to list all the monies you owe plus the interest rates.
Start with loans that have high-interest rates. Always pay off the loans with the higher interest rates first as they are costing you more money.
3. Sell Your Junk
Most household owners struggle to repay their loans yet they have a solution. If your garage is overflowing, it means you have a lot of junk that can be turned into cash. Your prized golf bag and all its contents which you don’t use can turn into instant cash on eBay today. There is no reason to pile up old furniture in the garage when you know all too well it will never be used. Look around your house and turn all unnecessary items into money which you can then use to repay your loans.
4. Consolidate Your Loans
Most household owners are up to their neck in debt; from auto loans, mortgages, credit card loans to student loans. Repaying all these loans can be very daunting. However, you can consolidate these loans into one new loan which means all the smaller debts are repaid and you only have a single payment to worry about. This means lower interest rates and more cash flow to improve your quality of life.
5. Build a Zero-Sum Budget
A budget is important in financial management, but if you are planning to repay all the money you owe fast, you need a different kind of budget. This means every dollar you earn should be allocated to a specific need. A zero sum budget means no money is left hanging around.
Gaining freedom from multiple loans is what everyone desires. These smart moves will help you start this journey.