Debts of all kinds are truly trouble. It is quite overwhelming and panic-inducing. It becomes a headache if a person doesn’t earn a handsome income. With low income, glaring debts on multiple credits seem impossible to pay off. Uncontrollable debts often lead a majority of people towards a number of mental illnesses including depression. Especially when a person has no money, all of his/her time is spent thinking about the debt and what is going to happen in the near future.
Therefore, we are here to give you some tips on how to pay off debt fast with low income or when broke. But you need to decide first, are you calling yourself broke after spending on non-essential items. If this is the case, then you need to revisit your strategy and follow the tips given below.
Here are some of the most famous methods that finance gurus have stressed upon if you have multiple debts to take care of:
Prioritize & Plan
A comprehensive plan to pay off all your debts is crucial. You must be aware of all the figures, all your balance, the different interest rates on various cards, the premium, and the time limit for each credit card.
It is better to either write it all down or have it documented on your computer. Once you get the exact facts and figures, you must prepare another list of all your expenses and spending. This way, you will know exactly which areas you are spending more than necessary, and which things in your life are eating up your income but not adding any value to your life.
Make a Budget with Zero-sum Technique
Once all your debts and expenses become glaringly obvious, you must swallow the bitter pill and prepare a budget using the zero-sum technique. It means that you divide all your income into various categories including your minimum credit card payments, paying off your bills, and just a little bit of saving by cutting off all extra expenses.
Prioritize the Credit Cards with either the Lowest Balance or the Highest Interest Rate
Finance experts say that the best and most effective ways to pay off debt fast with low income are to make sure to use one of the following approaches
- You pay off the credit card with the highest interest rate first, so that over the years, you do not pay almost the double amount of your credit in interest.
- You pay off the credit card with the lowest balance first, but this method may end up being costly because the interest will keep piling on.
Whichever method you choose, just try to pay the minimum amount for each card regularly, without missing, so that you do not have to pay extra money on late fees.
Also, choose one card on which pay just a little more than the minimum amount.
