5 tips to go Debt-free

11 August, 2016

Tip #1: Track your spending! If you can’t seem to figure out where your cash earnings have flown off to, start making it a habit to keep all your receipts for cash, debit and credit card purchases. This allows you to track your spending patterns and make the necessary adjustments in the future.

Tip #2: Prioritize your debts. There are two ways to prioritize your debts. Firstly, according to the danger level. Debts like mortgages are considered more dangerous because the debtor is at risk of losing his home. Secondly, according to the expense level. The key in going debt-free is paying off the most expensive debt first, i.e. the debt with the largest interest rate, and slowly making your way through the rest. This is called ‘snowballing’ and is used by most debtors. For more information, you can click HERE to read our blog about debt consolidation.

Tip #3: Get a Debt Consolidation Loan. A lot of people use debt consolidation loans to go debt-free. Some may argue that this, in fact, creates more debts in the future, but if done correctly, it can be found useful. Monexo charges as little as 7% and up to 23% APR compared to the 30-35% APR charged on a credit card. Read more about it HERE.

Tip #4: Avoid taking mortgage loans with high loan-to-value ratios. It may be attractive having a smaller down-payment, but such loans come with considerable risk. For example, if homeowner A gets a 95% mortgage plan and the housing prices fall beyond 5%, then homeowner A would end up paying debts larger than the market value of the flat. Although such loans do not require any submissions of income proof, they should be avoided as you would be in debt for a much longer time period, let alone the substantial risk from price fluctuation.

Tip #5: Switch your debts to cards with a lower interest rate. This is not the most effective way of going debt-free, but it certainly gives you more time to do so! Indeed, it is impossible to find a card with 0% interest rate, but by just switching to a card with a lower interest rate certainly does the trick. For this tip, the key thing to pay attention to is saving money and not building up your debts.  

When you finally go debt-free, you should focus on building up a financial cushion. The simplest way of doing so is through SAVING. Non-conventional platforms, like Monexo, provide solid returns as high as 15% p.a. Learn more about it HERE.

Sources:

10 Tips for Becoming Debt Free”. CBN. Web. Deborah Nayrocker.

Become debt free in 2016 with these 9 steps”. Mirror. Web. Julia Rampen.