Getting into debt is relatively common, and it happens for more than a few reasons. Mortgages for a home and a loan for a new car are the most common of these.
As natural as these are, reducing your debt is a priority from the second you get into it. If not taken care of, they risk you losing your assets, among other repercussions. Everyone knows this, but they’ll often struggle to get out of debt. It can be overwhelming and stressful, and can even cause mental health issues.
The right strategies can help you with this more than you’d think. They’ll help you reduce your debt in a healthy and sustained way, with some strategies helping more than others. No matter what kind of debt you’re in, seven of these strategies can help you reduce it.
Reducing Your Debt: 7 Best Strategies to Use
1. Make a Budget and Stick to It
The natural first strategy to use when reducing your debt is to create a realistic budget that actually helps with this. You mightn’t be able to manage your debt without this.
There are several ways you can create a budget that helps with your debts. The 50-30-20 rule is one of the more notable. It involves you allocating 20% of your monthly budget to paying off your debts. This should be seen as the minimum, and paying off more when you can is recommended.
While this takes time, it’ll help with your debts quite a bit. You’ll just need to stick to your budget.
2. Consider Debt Consolidation
Debt consolidation is a valuable tool for managing debts, but it’s not the best option for everyone. It’s the process of putting all of your loans together into one larger loan.
While this doesn’t reduce the debts themselves, it means you’ll have one monthly payment to worry about instead of several. Though this payment can be larger than each of the individual loans, it’ll be lower than all of them combined. You’ll have a sole lender with this instead of several of them.
The process makes repaying your debt much more manageable, and it could take a lot of the stress out of the process.
3. Use Balance Transfer Options
Balance transfer options are often an overlooked way to reduce your debt. The process involves transferring the balance of a high-interest credit card debt to a lower interest credit card. While this doesn’t actually reduce the debt, it prevents it getting uncontrollably high.
You’ll naturally have a lower interest rate on the debt. In turn, that means the debt will grow slower.
It helps avoid credit card debt from spiralling out of control, and you have a chance to catch back up with it. This provides many of the same benefits of a debt consolidation, but mightn’t be as complicated to get done.
4. Contact Creditors About Hardship Programs
While you mightn’t realize it, many creditors have hardship programs. These are designed to help people who struggle to pay off their debt for specific reasons. It can always be worth looking into these programs.
There’ll be some qualifying hardships that could make you eligible for this:
- Death in the family
- Divorce
- Job loss
- Disability
- Illness
If you’re struggling to reduce your debt because of any of these reasons, you could be eligible for a hardship program. Contact your debtors and ask about the programs they offer. Take advantage of whichever hardship programs you’re eligible for.
5. Use Credit Counseling Services
The process of reducing your debt often feels overwhelming. Not only can it be a complicated process, but it’ll affect your mental health and you mightn’t know what to do.
While you could feel alone during the process, you’re not. Multiple professionals can help you with this. Credit counseling services are great for this. They provide a range of services to help you develop a debt management program that actually helps you. You can manage your debt much better with their help.
They can help with almost all areas of this and are worth contacting when you need it.
6. Try Maximize Your Income
All of the strategies to reduce your debt so far have focused on the debt itself. Sometimes, it’s worth looking at your income while you’re at it.
Try to look for ways to increase your income without taking on anymore debt. Technology has made this easier and easier, with side hustles now being easier than ever to start. Many of these could be worked around your current job and give you more funds to pay off your debt with.
If you’re struggling to make your debt payments, this could be a great way to overcome it. You could pay down your debt faster with this.
7. Think About Bankruptcy
While this is one of the more extreme ways to reduce your debt, bankruptcy is always an option. It’s best seen as your last resort, however, and it’s best to try the above first.
This shouldn’t be treated as a casual decision, but it can be the right option under certain circumstances. It’ll help you discharge certain types of debts that you mightn’t reasonably be able to pay back, no matter what you do. Getting through bankruptcy can be complicated, though.
It’s a legal process and could take a while to get through.
Reducing Your Debt: Wrapping Up
It’s common for people to get into debt, with mortgages and car loans being some of the more notable of these. Then there’s medical debt and other forms. These can often be difficult to get out from under.
In time, this leads to a lot of stress and anxiety. They even feel overwhelming and as if you can’t get out from under them. Thankfully, this is far from impossible.
Reducing your debt often takes time and work, but it’s not something you can’t get done. Putting the effort into the right strategies helps you reduce your debt in a sustained and healthy manner. It’ll take time, but you’ll get there.
There’s no reason why you can’t be debt-free in the future.
