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How to Pay Off Debt When You Make Little Money

pay off debtGetting out of debt when you are already struggling to pay your monthly expenses can seem like an impossible task. How do you save up to pay off past debts when your income barely allows you to maintain your current lifestyle to begin with? To be sure, this is a problem that is faced by many people. With little income to work from and a mountain of debt to pay down, it can seem like your options are few and far between.

Fortunately, there are ways in which you can get out of debt without asking for a raise somewhere out there in the working world. Even using just your current salary, you may be able to find a way to carve out money each month to pay down that damaging debt so you can look forward to a better financial future.

Consider Consolidation

When trying to pay off debt, the interest rate can be a significant hurdle to overcome. This is a piece of the puzzle that is keeping you in debt, as just paying off the minimum balance each month will do very little to reduce your outstanding debt. It can be years and years before you even make a dent in that outstanding balance if you are only making the minimum payment. However, if you are dealing with a high interest rate, the minimum payment may be all you are able to handle.

That is where debt consolidation comes into the picture. When you consolidate your debt, you will bring all of your various accounts together into one place where you can pay it off all together – hopefully at a lower rate than you were paying on the individual accounts.

For instance, if you are paying on credit card balances that have a 20% rate, you may be able to consolidate those accounts into a loan that charges between 5% – 15%. While you will still be paying interest, that interest will be less and you will be looking at a shorter length of time before your debt is killed. There are various options available to consolidate and reduce your interest rate with Avant and Lending Club being among the best.

Not Every Deal is a Good One

You have probably seen plenty of debt consolidation offers, but remember, not every debt consolidation deal is a good one. Don’t fall in love with this idea so much that you are willing to take the first offer which comes down the pipe. It is important that your debt consolidation deal actually saves you money, so carefully check the interest rate that you are being offered, along with any fees that you will have to pay to close the loan.

Zero Interest Balance Transfer

One other option for paying down debt while not making a large income is to look for balance transfer offers where you can move what is owed on your credit account to a new card which offers 0% interest for a period of time. This can be a great way to take a ‘break’ from interest charges while taking a nice bite out of the overall balance. One caveat with this plan, however, it to watch out for upfront fees – the charge to transfer your balance may outweigh your interest savings in some cases.

 

Have you considered these options to help you get out of debt? What other strategies can you think of to help get out of debt without earning more?

 

Photo courtesy of: Flachovatereza

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John Schmoll is a Dad, husband and veteran of the financial services industry. He's passionate about helping people learn from his mistakes so that they can live lives free from the shackles of debt and empowered to make their money work for them. You can check out his other sites: Frugal Rules, for ways to improve your financial literacy; and Sprout Wealth for tips on different ways to make more money. John has been featured on Forbes, Lifehacker, Yahoo Finance and US News & World Report and more. If you're wanting to grow your blog, check out my blog coaching services to see how I can help you take your site to the next level.

2 comments

  1. Like your blog topic John. I went through some rough times during the housing crisis a few years back. It was hard and the zero percent balance transfers saved my life a few times. I have found it is a better option and less expensive to use the zero percent balance transfers over paying the monthly interest on my credit cards.

  2. Having little money and still have debt is one of the worst situation to be in. I think I would do is change first my budget plan and then I would try to look for side hustles to generate more income. And, I would totally consider consolidation.

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