Want to know how to pay off debt fast with no money? It might be easier than you think.
On my personal finance journey I’ve encountered some crazy get out of debt strategies. Maybe you have too.
Whether it’s Dave Ramsey’s Debt Snowball, the debt avalanche, seven baby steps or the stack method, they all have one thing in common – you need more cash to use these methods to pay off debt.
But, if we had extra money lying around we wouldn’t be in this situation, would we?
So how do you pay off debt with the money you already have?
A Simple Way to Pay Off Debt Fast with No Money
Before you take the first steps to pay off debt, the process can seem complicated and stressful. Many of my clients are just too overwhelmed to take on consolidation themselves. The good news is it doesn’t have to be this way.
There are many simple and effective ways to consolidate credit card debt without any extra work. Many have found that they can handle the debt consolidation process themselves, while others prefer to work directly with a debt consolidation counselor.
So, how does debt consolidation actually work?
Debt consolidation is the process of securing a new line of credit to pay off all existing credit card debt. The new loan must be large enough to cover the entire balance on all open credit cards.
By eliminating credit card debt with a debt consolidation loan it is possible to get lower interest rates and reduce monthly payments. Plus, consolidating your credit cards limits the number of creditors you have to deal with each month!
Credit card debt consolidation can happen a number of ways. The most common include unsecured personal loans, zero interest credit card offers and home equity lines of credit.
There are also options available if you have bad credit.
When collateral is not available to secure a debt consolidation loan, many have turned to low interest credit cards to solve their financial problems. A little financial creativity can go a long way towards paying off debt fast.
Unsecured personal loans are a low-risk way for consumers with good credit get out of debt fast.
Typically traditional personal loans have a rigorous approval process due to the lack of collateral available to guarantee the loan. To minimize risk lenders will usually only approve loans to borrowers who have excellent credit scores.
While many banks have cut back funding for personal loans there are many other options available online. Today there are online companies that can provide unsecured personal loans without the fees and overhead normally associated with traditional banks.
Although online loans normally have high interest rates, they are more competitive than most credit cards. Consolidating multiple credit cards with high interest rates into a single personal loan can dramatically reduce interest payments. More importantly, the lower monthly payments can help you pay off debt fast with no money (or at least no extra money).
It should be mentioned again that personal loans have the advantage of being unsecured, meaning that in the event of default the debt can be erased during bankruptcy. On the other hand, secured loans like home equity lines of credit and second mortgages require a home as collateral. In the event of default with a secured loan any collateral attached to the loan can be foreclosed on in order to recover any lost assets by the bank.
Next Steps to Pay Off Debt Fast
Consider these debt consolidation options with your financial goals in mind. Each strategy has its benefits as well as substantial risk.
Before you consolidate credit card debt it is essential that you establish a budget and a very clear plan of attack towards paying off credit card debt. Setting a specific timeline and strict financial planning will take you a long ways towards financial freedom.
A smart credit card consolidation plan could be your ticket out of debt fast!