Debt Freedom: Money is the need of every person, but not everyone gets the money as per their need. In such a situation, they take the help of loans to support their family. Especially, in India, most of the total population spend their lives on loans and do not get rid of loans till their death.
Once a person gets caught in the debt trap, he keeps sinking deeper and deeper into it. This debt trap makes a person’s life stressful. But, some smart people manage to get out of it by adopting the right strategy. Here we are going to tell you 5 effective ways to get out of the debt trap, which will help you in getting rid of the debt.
Make a budget and control expenses
First of all, calculate your monthly income and expenses. Make a strict budget and reduce non-essential expenses (such as eating out, unnecessary shopping). Use a part of the savings every month to repay the debt. This will clear your financial situation. If you have multiple loans, first repay the loan which has the highest interest rate, like credit card loan. This is called the “avalanche method”. This will help you reduce the interest burden in the long run.
Find sources of additional income
Earn extra income by taking up a part-time job, freelancing or starting a small business. Use this money directly to repay the loan. For example, online tuition or skill-based services (such as graphic design) can be good options.
Refinance or consolidate debts
If interest rates are high, refinance your debts. Pay off your old debt with a new loan with a lower interest rate, or convert multiple debts into one consolidated loan, which will make monthly payments easier and cost less interest.
Create an emergency fund and avoid loans
To avoid borrowing in the future, create an emergency fund (at least equal to 3-6 months of expenses). Also, be disciplined after repaying the debt. Use credit cards wisely and stay away from unnecessary loans.