Getting out of debt isn’t easy as it takes more than just money.
You also need to have patience and determination which can be the bigger struggle, since many people lose hope just hearing the word debt.
While some people say it’s impossible to get out of debt, especially as a college student with student loans, that’s completely false.
By managing how you spend your money and suppressing self-gratification, you can pay off your debts and stay debt-free for a long time.
If you research online on how to get out of debt quickly, you’ll see tons of search results – and while most of these so-called guides have relevant information, some of them may be false and can worsen your situation.
Hence, be prudent and look for real strategies you can employ to get out of debt more efficiently.
1. Consolidate Your Debt
One of the most efficient ways to manage and get rid of what you owe completely is to consolidate your debts.
Debt consolidation is the process of putting all of your student loans, car loans, mortgages, personal loans, etc., in a single loan. This would make paying them off easier and more efficient.
It’s easier because you don’t have to note all their individual interest rates, repayment terms, due dates, etc. and it’s much more efficient because you can manage your budgeting in a much simpler way.
Not only that but since you need a consolidation loan to consolidate all of your debts, you can take advantage of this by getting a loan with a lower interest rate.
This will also improve your credit score since it will add to your credit utilization, especially if you pay the recommended amount on time.
2. Build an Emergency Fund
In hindsight, creating an emergency fund seems to be counterintuitive if you are trying to get out of debt. But, in fact, you can use this emergency fund to pay off your debt and use it in emergencies or unexpected expenses.
This would help greatly when you’re on a budget. Having to allocate additional funds to an unexpected expense out of a tight budget can put you into a very difficult financial predicament.
An emergency fund is a safety net because, in an emergency, you can take money from it instead of having to reach for your credit card.
3. Negotiate with Your Lenders
Higher interest is one of the primary reasons that make getting out of debt much harder. Fortunately, you can negotiate with your lender and try to lower it.
However, lenders do this with severe discretion, and you must be in a position to negotiate with them first.
That said, having a good and trusting relationship with your lender is a good factor in them approving you for a lower interest rate.
Not only that, but they might also offer some promotions and other perks if you have been with them for a long time.
One example is a balance transfer. They can transfer your balance to an account with a much lower interest rate, albeit with a time limit.
Before this time limit expires, you’ll want to have significantly reduced the amount of your debt, if not having paid it off entirely.
4. Try the Debt Snowball Method
If you happen to have some extra money and are in the mood to pay off more than the recommended amount in your loans, then you should try this strategy.
First, you need to have a list of your debts that is ordered from smallest to largest.
Then, with your extra money, pay off more than the recommended amount in your smallest loan and pay with the minimum amount in the larger debts that follow.
Do the same in the next smallest one until you pay it all off.
Over time, your loans would be paid off one by one, saving up more money for your larger debts.
This is an efficient way psychologically because people tend to be more motivated when having a few “wins.”
By snowballing through your debt, you’ll save up more dollars to pay your largest debts until you run out of debts to pay for.
5. Cash Out From Your Insurances
While this is a legitimate strategy, it comes at a price.
Over time, you will have accumulated a significant amount of money in your insurances, which you can put into your debts.
However, doing so is risky and can be expensive since it could come with tax consequences.
Also, this option can damage you and your beneficiaries if you’re careless.
Perseverance is Key
Getting out of debt is never easy, and there isn’t one surefire way to pay it off. In reality, it could take you months or years to pay it all off.
However, with perseverance, self-control, and ingenuity, you can pay all of your debts on time and eventually be debt-free.
And the earlier you start, especially in college, the brighter your financial future will be!