How to get out of debt easily

In this era of financial inclusion, many people take out loans or accrue debt for different reasons and purposes. However, when paying off debt becomes uncontrollable, it creates various problems in life. So, let’s understand how to take on a loan or debt, when to do so, and how to pay it off systematically so it doesn’t become a burden.

How to take loan or debt

Step 1: Do Your Homework

Before you take out a loan from a bank or any other lender, don’t rush into a decision. It’s important to do your homework first.

Here’s what to look for:

• The interest rate: How much extra will you pay for borrowing?
• The loan amount: How much money can you get?
• The tenure: How long will you have to pay it back?

Make sure these factors match your personal ability to repay and the reason you need the loan. Then, compare different loan products from various financial institutions. This is how you’ll find the best deal and the most benefit.

Step 2: Be Safe, Not Sorry

Finally, always make sure you borrow from a genuine and trustworthy source. This is the only way to protect your financial privacy and personal safety.

Be careful not to become a victim of financial fraud. Watch out for scams that promise unbelievably low interest rates or very large loan amounts. If it sounds too good to be true, it probably is.

When Can a Loan Be the Right Choice ?

Taking on a loan or debt isn’t always a bad thing—in fact, there are a few situations where it can be a smart move.

1. For Emergencies: The first and most common reason is when you’re facing a financial emergency and have no other way to cover the cost. A loan can act as a necessary lifeline when all other options are exhausted.

2. To Protect Savings: Another smart reason to get a loan is to avoid spending your hard-earned savings. If you have a significant amount of money saved but prefer to keep it untouched for future goals, you can get a loan. In this case, you can often use your savings as collateral to secure a loan with a lower interest rate.

3. For Big Purchases: Finally, loans are essential for big-ticket items that are simply too expensive to buy outright. This includes things like buying a home, starting a new business, or expanding an existing one.

By understanding these situations, you can make a more informed decision about when to use debt to your advantage.

There are several methods for paying off debt, and by adopting one, you can feel a sense of accomplishment. The best approach depends on your specific situation, including the type of debt, the interest rate, and the amount you owe.

To start, you should first figure out your total debt, including interest. Make a list of all your debts like student loans, car loans, etc. and then organize them from smallest to largest amount. Next, choose the method that works best for you and start applying it right away.

We’ve developed three methods to help you pay off your debt as quickly as possible. These strategies are designed to save you both time and money. By paying off your debt early, you can also boost your credit score, which builds trust with financial institutions and makes it easier to get future loans when you need them.

Let us start,

suppose you have to pay for loans,

• 1. Cell phone loan amount : $1000 Inter. : 9 % Tenure : 12 months (smallest)
• 2. Education loan amount : $30000 Inter. : 12 % Tenure : 36 months
• 3. Automobile loan amount : $50000 Inter. : 10 % Tenure : 48 months
• 4. Home loan amount : $200000 Inter. : 11.5 % Tenure : 120 months (Biggest)

Method 1 : Stress reliver

Start by paying off your smallest loan first, and then work your way up to the largest one.

Since you have four loans, you’ll be making four payments each month. With this method, you’ll pay extra on the installment for your smallest loan. This allows you to not only save money on interest over time but also pay off that loan well before the deadline.

Once your smallest loan is paid off, repeat the process with the second-smallest loan. You’ll continue to do this with each debt until you’re completely free. This strategy lets you become debt-free in a clear, ascending order : tackling the smallest one first and the biggest one last.

For Whom,

This is especially beneficial for people with significant debt, such as those who use half of their monthly income to make installment payments, particularly when their largest debt is burdensome.

• Paying off each debt provides a sense of accomplishment and relieves stress.
• After paying off a debt, you free up money that you can use for other purposes.
• This method can take more time compared to other strategies.
• It also results in paying more interest than other methods.

Method 2 : Tolerant Achiever

This method, the opposite of the previous one, requires you to start with the largest debt and end with the smallest. To begin, you put extra money toward your biggest installment each month while continuing to make regular payments on your other debts.

Once the largest debt is paid off, you repeat this process with the second-largest debt, and so on, until you are completely debt-free. Following this strategy, you become debt-free in descending order.

For Whom,

This method is best for people who don’t have a lot of debt, and whose biggest loan isn’t too huge. If their largest loan is too big, they might end up paying off a bunch of smaller debts first and won’t be able to get the full benefit of this method.

Merits-Demerits

• Compared to the first , this approach is faster, but it is slower than third one.
• You’ll save more money on interest than you would with the Stress Reliever, but not as much as with the Fast Mover.
• To make it work, you need courage and patience because you have to pay off your biggest debt first and that is why it’s called “Tolerant Achiever” .

Method 3 : Fast Mover

This method is significantly different from the other two. With this approach, you are required to pay an extra amount with each monthly installment. By doing so, you can become debt-free much faster while saving a significant amount of money, as you’ll be paying off each installment well before its deadline.

For Whom,

This method is particularly beneficial for those who don’t have a lot of debt and/or have enough extra money from their income every month to adopt it. It is also well-suited for individuals who are highly motivated to become debt-free quickly, as it requires consistent, extra payments.

Since you’re paying off each installment well before its deadline, this approach is a powerful tool for anyone looking to save money on interest and achieve financial freedom sooner.

Merits-Demerits

• It saves more money than any other method.
• You will be free from your financial burden very soon.
• You should have enough extra money every month.
• It seeks consistency and determination

Bottom-line

Paying off your debt is your first and most important responsibility, not only for your own bright future but also for your family’s.

You can create a new method by combining these methods or using information from them according to your debt-paying plan and capacity. After all, no one has as much understanding and detail of your debt and income as you do.