Debt is one of the biggest burdens we all carried or have carried at some moment in our lives. With just a few get out of debt simple steps, you can reach financial stability. Some of these steps can be applied even if you feel like your debt is no longer manageable.
1. Smallest Debt First
The first step that you should put into practice is to get rid of the smallest debt first. If you have a car loan for which you still have a large principal and credit card debt that is smaller than the car loan principle, you should focus to pay off your credit card as fast as possible. The moment you have it paid, you free up cash that can be used to pay off the car earlier.
2. Get Rid of Your Car Loan
Amongst the many get out of debt simple steps that you can follow, this one is the least followed. People do not want to give up on their new car even if they could sell it and use that cash to close the loan. This attachment to a vehicle is an unhealthy relationship based on debt. If your outstanding principal on the loan is smaller than the current value of the car, you should sell the car, pay off the loan and with the leftover money, buy a cheap car in cash. Using this strategy frees up the cash that you would otherwise be paying monthly on the car loan.
3. Refinance Some Loans
Replacing debt with other debt does not sound like something you would think of as suitable to be part of getting out of debt simple steps that you can implement. It should be done but only in certain conditions. Refinancing makes sense only if you can get a better interest rate. You should refinance debt to get a smaller interest rate but for the same loan period. Under no circumstance should you refinance a loan with a new loan that spans over a longer period? Also, do not refinance small loans like credit card debt as it will not move the needle. You can do this for car loans or mortgages.
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