It is easier to get into debt than to get out of it. Most times, a loan can be incurred in a matter of minutes while it could take months or years to pay it off. With the rise in online loaning apps in Nigeria, it is very easy to fall into the trap of taking loans.
If you are currently struggling with paying off your debt, here are some steps you can follow to pay it off faster:
1. Stop incurring more debt
The first step to getting out of debt is to stop accumulating more, else it’d be harder to come out. Avoid borrowing money from your family, friends, banks, etc. This step will not eliminate your loans but will help in the process of getting out of it.
2. Organize your debt
You can do this by calculating how much loans you currently have, then arranging them according to priority so you will know which ones to pay off first. You will need to list the amount you owe, the interest payable, and the monthly minimum payment on each loan. It is easier to develop a debt-repayment plan when you have all this information available.
3. Increase your monthly payments
If you can pay more than the monthly minimum on your debt, you will get out of it faster. Interests can exponentially increase the timeline you have for paying off your loans. To get out of debt faster, try to increase your monthly payments.
4. Build an emergency fund
Having an emergency fund is necessary when trying to get out of debt, it prevents you from incurring more when life happens. Unexpected or unplanned expenses might be the reason you are in debt; an emergency fund will take care of such expenses so you do not end up borrowing again.
You can take advantage of Overwood’s high-interest rate to build your emergency fund. An ideal emergency fund has up to 6 months of living expenses saved up.
5. Have multiple income streams
Building multiple sources of income is a necessary step to get out of debt and avoid living paycheck to paycheck. An extra source of income will help you pay off your loans faster than you expect. This could involve starting a side hustle, getting a part-time job, or selling products online. Using the extra money you earn to pay off your debts is key to getting out faster.
6. Change debt-enabling habits
You will need to cut down on your expenses as much as you can to manage your finances effectively. The fact is, more than half of Nigerians spend more than they earn each month. Once you track your spending habits, you will be able to cut off the excesses so you can live frugally.
You can achieve this by replacing paying for DSTV with GOTV, cooking home food rather than eating out, and reducing your data consumption. Just try to live below your means for as long as possible until you can pay off your debt.
7. Live within a budget
One of the reasons most people run into debt is because they do not know how to manage their expenses. To become debt-free, you’ll need to be in control of your personal finance and the best way to achieve this is by budgeting. Live within a budget and cut off the excesses in your expenses.
Becoming debt-free can be a difficult task but by practising these habits and being disciplined, you will achieve it in no time!
“Never spend your money before you have it.”
— Thomas Jefferson