How to become debt free in a short time?

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How to become debt free in a short time?

There are many different loans which people take for a variety of purposes. House loans, car loans, emergency loans, equity loans and bad credit loans are just a few examples. Credit card bills are also a part of the debt. It is not possible for anyone to clear off all the loans at the same time . A systematic approach is required. Given below are a few steps which you can follow to get rid of your debts easily:

  1. Make a list of your loans- It is important to keep all the data related to the loans in one place. Once you organize the information, it becomes easy to identify the loans which need to be paid off first. You should arrange your debts in terms of priority of clearance.
  2. Sequence of clearing- Generally it is advised that the loans with the bigger amount and higher interest rate should be cleared off first so that the burden gets reduced substantially. However, the time limit on the loans is another factor which should be checked. Old loans which have gathered quite a lot of interest amount over the years need to be tackled. You should choose your sequence of clearing debts after looking at your budget.
  3. Setting reminders- If you have a tendency to forget your monthly payments, then you should set reminders on your phone or any other device so that you can pay off your monthly installments on time and reduce your debt burden. Missing payments can not only lead to higher interest but it also damage your credit score.
  4. Juggle your budget- Paying off debts requires you to make changes in your budget to fit in so many monthly payments. It is always better to repay the loan money using the cash flow that you have instead if taking a new loan to pay off old debts. Your priority should be to clear off the loans one by one and this is only possible when you deftly handle your monthly budget and reduce unnecessary expenditure.
  5. Prevent the use of credit cards- You need to stop using credit cards till the time you are able to pay off all your old debts. There is no sense to rack up new debts while the old ones are still not cleared. Controlling your expenditure and using the extra money to pay the loans can improve your financial condition within a reasonable time period.

These few steps can help you systematically cut down your debts and lead you towards a debt-free life.

 

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