How to Get Out of Debt Fast: A Step-by-Step Guide
Managing debt can feel like an incompatible mountain to climb when bills come rolling in and interest rates rise. Many persons in India feel overwhelmed by loans, credit card dues, or simply unanticipated expenses which keep them in a debt trap. This extensive guide on how to get out of debt quickly gives you specific things that you can do to help get your life back on track and out of debt. It can be difficult to pay expensive EMIs or loans taken at high-interest rates, but these tips should help to recover from the debt trap and financial future.
Understand Your Debt Situation
If you want to get out of debt quickly, the first step is to take note of exactly what you owe. Make a list of all your outstanding debts – credit cards, personal loans, home loans, or EMIs. For each of them, note the principal amount, interest rates, and minimum monthly payments. This information will help you clearly see what debts you need to pay first, since it will allow you to pay off the high-interest debts first, as those will be the debts that are costing you the most.
In India, it is not uncommon for the annual interest rates charged on credit cards to exceed 40%. As a result, these debts should be repaid first. Use a spreadsheet to write out your debts or budgeting apps to keep track of your debts. You need to be aware of your financial obligations if you want to escape the cycle of debt.
Create a Realistic Budget
Sound budgeting is essential to understand how your money is being spent and to pay down debt faster. Track your income and expenses every month until you can find areas to cut down expenses. It may be in the form of eating out less or eliminating subscription services—all of which are freeing money to go toward your debt reduction.
In India, household costs like groceries and utilities take a sizable proportion of available disposable funds, and that’s why you need to make sure you are only spending money on the essentials. Use a portion of your income to pay down debt while directing the rest of your income toward your essential spending. You can use the budgeting tips provided on Growthinfy to establish your own sustainable budget that considers key areas for Indian households.
Choose a Debt Repayment Strategy
To pay off debt quickly, we propose you establish a payment framework. There are two widely accepted strategies for paying off debt: the Snowball Method and Avalanche Method:
- Snowball Method: First pay off the smallest debt you can while making minimum payments on everyone else. You will quickly build momentum as you clear your many smaller debts first.
- Avalanche Method: This method is focused on placing extra payments on the highest interest debt to save money long-term.
In Indian circumstances, the Avalanche Method is more likely to be the best technique to use because of the high cost of credit card interest. Regardless of which one you choose, you must be able to maintain your motivation. Understanding the potential savings is as easy as referring to an online EMI calculator.
Negotiate with Lenders
Don‘t be afraid to reach out to your lenders to negotiate better terms. In India for example banks like SBI or HDFC may provide lower interest rates or an extended repayment term if you tell them your financial hardship, and also consider a balance transfer on credit cards to avoid high interest costs.
For example, if you’re able to transfer a high interest credit card to a credit card with a zero percent introductory period you can save yourself thousands of rupees. After you’ve taken a careful look at your debt situation, reach out and talk with your bank to explore your options in easing a debt trap.
Increase Your Income
Increasing your income may help you to pay off your debt more quickly. In India, there are freelance platforms like Upwork or Fiverr that allow you to earn extra money online. You could also consider a part-time job, tutoring, and even selling unused items online via OLX or Quikr.
So, for example, if you were able to earn ₹10,000 extra every month, this could go directly toward your high-interest debts. Check out Growthinfy’s side hustle ideas for easy ways to increase your income and get out of debt faster.
Cut Unnecessary Expenses
Cutting discretionary spending is a highly effective method to free up money. For example, in India, switching from ordering food from Swiggy or Zomato to cooking at home can save you hundreds of rupees a week. Cancel subscriptions you aren’t using (by the way, Netflix may be a waste, but how about OTT?) and stop shopping impulsively on the e-commerce app you downloaded.
Record your expenses from the last couple of months and take note of any monthly recurring expenditures that aren’t necessary. Eliminate these expenses and apply your savings to the debt repayment plan you created, to eliminate the debt faster.
Consider Debt Consolidation
Debt consolidation involves combining your debt into one loan with a lower interest rate. Personal loans from banks in India, such as ICICI or Axis Bank, typically only charge 10-15% compared to credit cards, which have higher rates. Debt consolidation simplifies the process of repaying your debt and also makes it cheaper since you will be paying less in interest.
Before consolidating your debts, compare the terms of the loan from the bank. You need to double-check that your new EMI can fit into your budget. Debt consolidation can be a way for someone trapped in debt to escape, but bear in mind that you should not take on any new debt while paying off your existing debts.
Build an Emergency Fund
When you are focused on clearing your debt, it is all too easy to want to apply every single rupee to debt repayment. It’s worth remembering that things can pop up you didn’t anticipate like a medical bill that you have to pay. This is why a small emergency fund of roughly ₹10,000-₹20,000 is a good target to help facilitate the very urgent things that you may have to cover.
Try to keep this money in a liquid mutual fund like a money market fund or savings account as you want to have very quick access to this money. Having some type of emergency fund relieves you and prevents you from being tempted to use your credit card, which will help you to stay more motivated to get out of debt quickly.
Avoid New Debt
To avoid falling back into the debt trap, stop taking on new loans or spending on credit cards. Avoid “buy now, pay later“ options from sites like Flipkart, as they can encourage overspending. Use cash or debit cards for regular purchases.
If you have to borrow money, use the lowest-cost options, such as borrowing against fixed deposits, which are cheaper in India. Discipling yourself will continue your success in repaying debt.
Seek Professional Help
If you feel overwhelmed by your debt, a financial advisor or credit counselor may be of assistance. They can also help you develop a repayment plan or negotiate with your creditors on your behalf.
Be careful of fraudulent debt relief schemes that claim to resolve your debt quickly. Make sure you research trusted professionals who can help navigate your way out of debt.
Stay Motivated and Track Progress
Paying off debt is a marathon, not a sprint, so celebrate small wins (like paying off a credit card) to help stay motivated. Using apps like Cred or Paytm will help you keep track of repayments as you go and also show how far you have progressed from the beginning.
Continue to check up on your budget often, and make changes as needed. Consistent success stories on Growthinfy‘s blog covering all aspects of finance and financial freedom should help motivate you to keep going. With patience and flexibility you will one day be able to no longer be part of the debt trap, and conversely be in a financially peaceful space.
Conclusion
To get out of debt fast it takes discipline and planning and a smart approach. You can take back control of your money by understanding what debts you have, budgeting, and making a repayment strategy like the Avalanche or Snowball methods. For our Indian readers, the use of local resources and negotiations with banks or lenders and taking on side hustles are also available. Start today, be consistent, and create a way to stop the debt roller-coaster to enjoy a better financial future.
