How to Pay Off Debt Faster Without Feeling Overwhelmed

What is debt?

Oxford dictionary defines it as ‘a sum of money that is owed or due’, another definition is a ‘state of owing’. Personally, I prefer the latter definition, it best depicts how debt truly feels like.

I like others see debt as a state of being weighed down and almost trapped (the pronunciation even sounds heavy). I hated debts so much that in the early days, my idea of finance and investments meant saving. I only saved. I saved and saved and saved just because I did not ever want to risk being in a situation of having to borrow. Although I know better now with the beauty that is debt financing and the genius of compound interest on your investments. But what is it really about debt that makes it so unlikeable? What makes us think of debts and have that all too familiar sinking feeling? I think it’s the burden of having to pay it back.  

Ladies, debt can feel like a heavy burden, but you’re not alone. With a clear plan and the right mindset, you can take control of your finances and work towards eliminating those debts one day at a time and build a future that feels lighter and brighter.

To start with let us look at the different types of debts. So, for you reading this, your friends, haters and family, most of your debt will fall into the following categories:

Secured debt, Unsecured debt, Revolving debt, and Mortgages.

This is the part where we would put all these into bite sized chunks to digest (forgive me I was really hungry at the time I was working on this article)

Secured Debts

Much like its name, secured debts are debts that are secured, i.e. there is something backing them and, in this case, it is the collateral, another name for secured debt is in fact collaterized debt i.e. a debt that has a collateral. It simply means that the borrower has pledged something of equal or most times more value in exchange for the debt so that in the event that the borrower cannot repay the debt the lender can take what was pledged and sell it to recover the debt. Think car payments, if the borrower does not make payments the lender can foreclose and take the car.

Unsecured Debts

These debts are insecure not unlike Issa Dee in the earlier seasons of Insecure. These debts unlike the above do not have a backing, in other words there is no collateral attached to these kinds of debts. The lender simply decides on whether to grant a loan based on borrower’s creditworthiness using factors like: credit score, credit history and other factors which may include social credit score in some unique instances. Because these types of debts are risky (they do not have backing remember?) they often attract a higher interest rate than their secured counterparts. For example, think credit cards and personal loans.

Revolving Debts

These types of debts are those that allow the borrower access to a line of credit (with a limit set) that they are allowed to borrow from as they wish. They can take up to that amount, pay it back then borrow it again as long as the borrower maintains the agreed upon obligations which may include and is not limited to typically making minimum monthly payments of an agreed upon minimum amount. Overtime the limit on the amount that can be used per time may increase. If you thought of a credit card whilst reading this, then you are right, credit card is a good example of a revolving debt.

Mortgages

Love them or hate them mortgages have their uses in that they allow more people the opportunities to be homeowners. They are form of secured debt used to purchase real estate and are paid back over a long period of time: 15 years or more sef. They are usually split into two main categories:

Fixed-rate Mortgages: which like its name is a mortgage with a fixed interest rate i.e. a type of secured debt for real estate with a fixed interest rate and

Adjustable -rate Mortgage: A mortgage with a floating interest rate i.e. an interest rate that can change periodically.

So let us get into the reason you are on this post and check out some practical examples to pay off debts whist not allowing it overwhelm you.

1. Understand Your Debt

While I agree with Cersei that power is power, knowledge can be power as well in most cases, this is an example of such a case. It is imperative (with an Igbo accent) that you understand your debt. Create a list of all your debts, including balances, interest rates, and minimum payments. This might feel intimidating, but seeing the full picture is the first step toward taking control. Use a notebook, a spreadsheet or a debt-tracking app to stay organized. This will give you an idea of which debts have higher interest rates, your largest loans etc. DO NOT SKIP THIS STEP… DO IT NOW.

2. Set Clear Goals

 Define your “why.”  Ask yourself why you’re doing this? Whether it’s achieving financial freedom, reducing stress, or saving for your dream vacation, having a clear goal will keep you motivated and will really bring things to perspective. (You can skip this part if you like me just want and like to be debt-free).

3. Prioritize High-Interest Debt

Remember when I said you should understand your debt? Yes, this is why: If you do not list them down and know your debts so well that you know which ones have a higher – interest debt, how do you want to eliminate it? Strategy advice: “You cannot conquer what you do know and understand.” It is not enough to just know; you have to understand and only then can you preempt (it would be in your interest not to forget this). Use the avalanche method to focus on high-interest debts first. Paying these off reduces the overall amount of interest you will pay, freeing up more money for other goals. It is like tackling the toughest challenge first, so everything else feels easier. Ways you can do this would include: refinancing. Refinance with your current lender or a different lender WITH BETTER RATES, thereby reducing how much you would have originally spent in repayments.

4. Consider the Snowball Method If you love quick wins, start with the smallest debts. Paying them off quickly can boost your confidence and create momentum. Sometimes, motivation is just as important as math.
5. Create a Realistic Budget

Cut down on everything. Yes, everything Monitor your finances the way a catholic nun monitors the girls in her charge. Your budget is your financial GPS. Track your income and expenses to identify areas where you can cut back. Do you really need that subscription you never use?  No, you do not, you also do not need that Starbucks and you do need to order in. No, you do not need a night out or a mini vacay, only people without debts can get those…Redirect those savings toward your debt. Remember, every little bit adds up.

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6. Increase Your Income

Side hustles are a game-changer. Whether it is freelancing, selling handmade items or that designer bag you bought knowing fully well that your finances were shaky or offering services like tutoring or baking, use your talents to bring in extra cash. Dedicate this money solely to your debt payments and watch your balances shrink.

7. Automate Your Payments :Automating payments ensures you are never late and helps you stay consistent. It is one less thing to worry about and keeps you on track without extra effort.
8. Negotiate Lower Interest Rates

At this point your credit score should have improved, you have sacrificed: No Starbucks, no unnecessary expenses, and you have paid out quite a bit of your debt, now is the time to negotiate better rates. Creditors usually do not want to have to deal with Non- Performing Loans (NPLs), you need to make sure that they know you know that and let them know that by reducing your rates they will be helping you to help them. Do not be afraid to advocate for yourself. Call your creditors and ask for lower interest rates or consider balance transfer options. Every percentage point saved adds up to big wins over time.

9. Reward Yourself Along the Way

Lol Sike. I am Nigerian. We do not do that. Your reward is being debt-free.

10. Stay Disciplined and Avoid New Debt

If you like, after all that you have suffered to get yourself to this stage, go back and start spending anyhow, I am here for you, this post is here for you, you will still come back and start from number one with me virtually screaming at you every step of the way..

If you have read to the end, I am here to tell you that truly you’ve got this! Paying off debt is about progress, not perfection. Every step you take is a step closer to financial freedom, and the peace of mind that comes with it is worth every effort.