Being in debt is something millions of Americans are intimately familiar with. Massive debt was already a problem even before the pandemic. Since the pandemic hit and most responses have either failed or never even attempted, even more Americans are struggling with debt today. One of the most well-known examples of people in debt in the United States are college grads. On average, college grads hold more than $30,000 in debt today and have to pay just under $400 every month to serve it. Depending on where you live, this could be similar to having to pay another round of rent every month.
Credit card holders have it even worse. While the average credit card debt is lover, at just over $2,300, the average monthly bill is almost double that of student loan holders at almost $800. In terms of magnitudes of loans, however, mortgages take the cake. People applying for mortgages these days apply for $371,500 on average. Looking at all this debt and the pandemic in combination, you would think this is as bad as it gets. Enter unemployment. More than 12 million Americans are still out of work today, making repaying all that debt all the more difficult.
But this is not the end of the road. There are ways to get out of debt. To get you started, here are three of the most effective things you can do to tackle your debt. And the best thing is: These methods work whether your debt is a few thousand or a few hundred thousand dollars. So, here is the number one easy way to get out of debt:
1. Get a personal loan.
First off, you may be wondering how it makes sense to take out another loan when you are already in debt. Well, here is the thing: Not all debt is created equal. The main difference between different forms of debt is the interest rate. And as you may have heard, interest rates are at a record low these days. This means that if you take out a personal loan right now that covers all your debt, you may be able to repay your debt at much better conditions and over a fixed period.
As interest rates go, you can even push them below 5 percent right now. This is a far cry especially from interest rates on credit card debt and can easily save you thousands of dollars right there. Just be aware that having a terrible credit score or other issues with your personal finances may jeopardize a super low interest rate on your personal loan. Also, missing payments on your loan can be expensive, so you should be confident that you can make the payments every month. If any of these seem like a problem, maybe number two will work much better.
2. Try a balance transfer card.
Balance transfer cards are another great and easy way to get out of debt. This mainly applies to high-interest credit card debt, though. What balance transfer cards do is that they allow you to take all your debt and transfer it to a credit card with a 0% introductory interest rate. The theory is simple. You just take all your high-interest credit card debt, put it on the 0% interest credit card, and server your debt without having to pay any interest on it. This way, every payment you make reduces your debt, and nothing is wasted on serving interest. By doing this, repaying your debt becomes much easier and cheaper.
Just as with point number one, though, there are a few things to keep in mind here. Most importantly, remember that the 0% interest on balance transfer cards does not last forever. Most of the time, the period for 0% interest is one or two years long. After that, you could get hit by super high interest rates on your balance and you lose all the benefits of your balance transfer. Another thing to keep in mind is that balance transfer fees can be super high. Since credit card companies do not get interest for your balance, they may try and sneak in a profit through high balance fees, which can eat into what you save by paying no interest. Make sure to weigh your savings against these costs before you make a choice.
3. Apply the debt snowball or debt avalanche.
Next to using some financing tools to get you out of debt like above, there are also proven methods that make this much easier to do. To use the debt snowball method, collect all your debt and find the smallest one. Then, focus all your efforts on repaying that smallest debt. Once that is paid off, you then focus on the second smallest and so on. By doing that, you snowball into repaying all your debt eventually.
The debt avalanche takes things the other way around. Focus down the debt with the highest interest rate first, because the lower the interest you pay the more money you can use to actually reduce your debt. This one will save you more money than the snowball method, but it also takes more discipline to pull off.
These three easy ways to get out of debt should give you a good start on getting things under control. Never be afraid to mix and match methods to your needs, but also stay vigilant because any method will come with associated risks as well.