How To Get Rid Of Debts and Become Independent? [For Students]

How To Get Rid Of Debts
I’m sure you would agree that debt is about much more than money. Any debt can cause serious emotional effects and even lead to depression. Sometimes it just feels like we’re never getting rid of debts and we are going to be living from payday to payday for good.

If you can relate to this situation and are feeling drained about it, look no further for ways to pay your debts off and become financially independent. I have some tips that will help you out.

How To Get Rid Of Debts?

When In Debt, Quit On Credit Cards

Seriously, you have to stop! Every time that you use a credit card you are making it worse, even if you are only getting cash advances. Cash advances have a high-interest rate, which starts accumulating from the moment you take the loan. It’s just too much; which is why, when in debt, you have to stop using credit cards.

And it’s very important to develop healthy financial habits during college, while you are young. You should never underestimate the importance of financial literacy and money management skills.

Put Money toward Your Debt Each Month

A healthy emergency fund is a must. Once you have created it, your priority should be wiping out debt. However, there is not a unique formula on how much money you should put toward debt monthly. If you happen to have a larger income, you can pay more debt down during that month; on the contrary, if you have only a little extra to spare, go little by little. Any option is valid, but the faster you play, the faster you’ll be stress-free.

We know it’s hard to put away some money while you are young. But just try to cut off expenses you don’t need. For example, Starbucks and other popular coffee shops are not something you should spend every day.

Cut Little Expenses That Add Up

Now it may not feel like it, but after a while skipping on that daily treat – coffee, soda, meal – you will notice that little by little you can save more money than you thought. Before spending money on something, ask yourself, “is it really necessary”? Remember that every time you save a little bit here, it’s a little bit to put toward debt.

Paying It off Is the Goal

It is quite common that once the debt is getting smaller, you start to loosen up a little. I don’t mean to be a killjoy, but you should keep in mind that the goal is to be freed from all debts. Once you start to loosen up, you could go back to where you were and you don’t want that.

Clear Debts with High-Interest First

As we have mentioned before, paying it off is the goal, whether you first pay the debts with the lowest or the highest interest rate. However, financially speaking, we advise you to clear debts with high interest first.

Try Freelancing

You can always give freelancing a shot to earn some extra money. Actually, almost all students in Europe have freelance or part-time jobs. Why not follow their example. There are many platforms where you can create a profile and search for a job, such as Fiverr or Upwork. You can also drive for a delivery service to make some money on the side.

Start A New Business

To start a new business when you are in debt may seem risky, but you can find out about personal loans for bad credit to invest in that startup you have been thinking of. With the right financing and planning, it could be your path to become financially independent.

Yes, we know that is not as easy as it sounds. But why not take a look at crowdfunding platforms or create a digital business that doesn’t require any investments? It’s known a great idea is much more important than money.

Must check out! How To Start An Online Side Business

Students and Loans: Debts and Refinancing

What Happens When You Refinance A Loan?

When refinancing a loan, you as a borrower take out a new loan with more favorable conditions to pay off your current debt. It is basically replacing an old debt for a new one with better terms. If you are thinking about refinancing, you can find out about personal loans for bad credit.

Is It The Same As Debt Restructuring?

No, it is not. In refinancing, you replace an existing debt obligation with a brand new one; but restructuring means that both the borrower and the creditor change the existing contract when the borrower is unable to pay the debt under the actual terms. A typical example would be when the due date for the payment is extended.

Refinancing vs. Restructuring

You should consider refinancing before restructuring because it does not affect your credit score negatively. On the contrary, it has a positive impact because your payment history will show that you paid for the original loan. Also, it is an easy process, and being eligible is quite simple.

Is Bankruptcy An Option?

You should always consider refinancing or restructuring before declaring bankruptcy because this option has a large cost for both the borrower and the creditor. Attorney fees for bankruptcies are thousands of dollars, plus government paperwork fees. Also, the negative impact on the borrower’s side is severe. Overall, the bankruptcy situation is a hassle itself; therefore, both parties usually consider refinancing or restructuring first.

Having debt can be quite overwhelming with all the lifestyle changes you have to face; however, our last advice to you would be to dedicate time to yourself to avoid extra stress. With a clearer mindset, it will be easier to choose wisely how to get rid of your current debt.

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AUTHOR_NAMEAbout the Author:
Lidia Staron is a part of Content and Marketing team at OpenLoans.com. She contributes articles about the role of finance in the strategic-planning process.
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