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A Complete Guideline On How to Get Debt Free Quickly

Taking loans or debts is not bad but if you are unable to repay them then it might become stressful for you. Several people spend a crucial part of their life in just repaying these loans. And it can become really challenging as well as frustrating to pay off these debts. Also to keep track of all your loan settlements with different rates of interest becomes really confusing.  Every one wants to clear their debts as soon as possible. But sometimes due to some unforeseen circumstances like sudden job loss, some serious illness, car repair, or expensive home repair, people tend to miss their regular monthly installments. Therefore, we have come with simple solutions to avoid becoming a loan defaulter and to get out of debt free fast.

Simple Methods to Get Out of Debt Free

Getting out of debt fast is not as difficult a task as it sounds. As mentioned, there are some things you can do to end your debt worries and get out of debt free forum as fast as possible. These solutions can be adapted by anyone who wants to get rid of their debts as soon as possible.

  1. Work Out your Total Debt Amount

In order to pay off your debt quickly, you need to make a plan. First, you need to figure out how much of the debt amount you have already paid to your creditors. And how much money still needs to be paid. You can also make a separate debt management plan for your secured debts and unsecured debts. Usually, unsecured debts include credit card outstanding bills, student loans, payday loans, outstanding store card bills, overdrafts, etc. All these unsecured loans mostly have a very high rate of interest charged on it. Hence, it becomes really difficult for most people to pay these unsecured debts entirely. 

Therefore, to clear your debts in an organized manner, you need to prioritize your debts first. And then make a monthly repayment plan to repay all your loans. In addition to this, you can make a separate list for your secured loans. Then if you manage those accordingly, then you can secure your home or car or whatever collateral asset against which you have taken the loan. By sticking to this debt management plan, you can get out of debt-free before the given time period.

  1. Apply the Debt Snowball method

If you have decided to pay more than the minimum monthly payments, of all your debts, then you can adopt the Debt Snowball method. In this method, the first thing you need to do is make a list of the debts ranking them in the ascending order of the loan amount. Now, use all your extra income and funds to pay off the loans of smaller amounts and make minimum installments of the bigger loans. Once the smaller debts are settled you will be motivated to clear your other debts as well. Keep putting the excess money to clear the debts on by one until you become completely debt-free.

This process of freeing debts from small to large debts is known as the Snowball Effect. This process has psychological effects as well. You will feel the urge to become financially free as you keep on settling your loans one by one. The main aim of this method is to accumulate all the extra money and using it to settle your loans one by one.

  1. If You Earn More Pay More

Use all the extra money that you earn in a month to pay off the monthly installments. If you have reserved some coupons from grocery sales then use those credits to pay off the store bills. Moreover, if you have made some extra bucks by working overtime, you can use this money to settle your debts faster. You can always pay more than the agreed monthly installments. Pay as much as you can afford so that you are debt-free quickly.

  1. Minimize Using Your Credit Cards

If you are determined to clear all your debts quickly, then it is highly recommended that you stop using your credit card or just minimize its usage. This is important for paying your debts as people often tend to spend more using their credit cards. As they cannot see the money, therefore they do not get the exact idea of how much they are spending. But when the credit card bills come, they realize it’s too late to save now. 

If you manage all your expenses by cash you will have a clear idea of how much you are spending. But if you are facing difficulty in minimizing your credit card usage you can freeze your card for a few days. This will change your habit of excessive credit usage and you will see a positive difference in the amount of savings at the end of the month. Now you can use these savings to settle your debts faster.

  1. Use a Debt Calculator to Keep A track of your Debt

You can calculate the exact debt amount, the additional interest rate, and how much amount is left to be paid to your creditor in order to become debt-free using a debt calculator. This type of calculator can be also used for determining the duration to complete your debt repayments. Along with it, this debt calculator also determines how much time it will take to get out of debt fast. These debt calculators compare the Annual Percentage Rate (APR) of the consolidation loan with that of the Annual Percentage Rate of the combined debt. The final results will show you the payoff duration left, total interest charged and the monthly payment needed to be made. In order to settle the debts as soon as possible.

  1. Use your Windfall Money to Clear the Debt

Windfall money is the money that you get suddenly from an unexpected source. This extra money can be like your salary bonus from work. Or if you get some cash as a gift from your grandparents, family or even friends on your birthday or some other occasions. It is highly advisable not to waste or even use this money. As the money that you got is excess to your income. Therefore, you can use the entire amount to clear any of your debt. If you are lucky enough and got a lump sum amount of money as windfall money, then you can pay off all your debt at once with this amount.

Get Out of Debt Free Org in the UK-

There are various organizations and firms in the UK, that provide help to debtors to resolve their debt problems and make them debt-free by settling all their loans as soon as possible. The most popular programs and debt settlement organizations and firms are-

  • Debt Management Plan- 

A Debt Management Plan is a plan that helps any debtor to manage all their debts so that they can clear them off quickly and at more affordable rates. This means you can settle your debts by making small monthly installments. A debt management plan is not legal but an informal agreement signed by you and your creditor. In this contract, you agree to pay all of your debt amounts but not at once, rather in small installments every month. The regular monthly installments are set according to your liability. The debt management company that you will consult will also make a suitable debt management plan according to your income and affordability. So that you can manage to pay off all your debts.

Under the DMP program, you can pay off your debts at a much affordable rate. You can arrange a debt management plan on your own. Or you may consult a licensed credit counseling company for this work. If you choose the latter, then these companies convince your creditors on your behalf. They will negotiate with the creditors to reduce the monthly repayments. And freeze the additional interest charged on the debt amount. So that you can repay their debts without taking another loan.  

  • IVA (Individual Voluntary Arrangement)

This plan is best suited to all those debtors who have a collective debt amount of £5000 or more. The Individual Voluntary Arrangement plan is basically a legal agreement between the debtors and their creditors. This agreement binds the debtors with their creditors in a bond that states that the debtor will clear all his outstanding debts in the form of small monthly installments. The Individual Voluntary Arrangement program usually lasts for a time span of 5 years. But in case the debtor is not able to pay off the debt amount completely. Then after the IVA 5 year term period ends, then all his pending debts will be written off. 

In addition to this, once you sign the Individual Voluntary Plan, your creditors are bound to freeze all the extra interest charged on your original debt amount. This implies that you no longer have to pay any type of additional charges. Except for the money that you have taken. Another benefit of this IVA program is that once it starts, all your creditors are restricted from pressuring you to make the repayments. They cannot demand debt payments as long as the IVA continues. Moreover, your creditors cannot contact you during this period. 

The Individual Voluntary Arrangement program is usually set up by either any professional insolvency practitioner or some Debt Settlement company. You can consult either of them. Once you agree to the terms and conditions of the IVA program, they will contact your creditors on behalf of you. And convince them to agree to the Individual Voluntary Arrangement plan. If 75% of the creditors holding your debt agree to this IVA plan, then your IVA will start. 

Bankruptcy- 

Bankruptcy is a form of insolvency. It is considered the last option for the debtors when they are unable to pay off the outstanding loan amount. Once the debtor files for bankruptcy or has been declared bankrupt by their creditors, 100% of your debts will be written off. However, you will have to hand over all your expensive assets. And your mortgaged property to the court after you are declared bankrupt. The government of the UK has especially advised this plan to support those people who can not afford to repay their loan amounts or keep up with the high monthly installments. 

All these plans and schemes are legalized by the UK govt. And are made to help people get out of debt and become financially free.