How to Get Rid of Domestic Debt: Five Effective Debt Plans

Domestic debt is a term used for the money owed by individuals rather than the corporate sector or the government. Due to the Covid-19 pandemic and the rising inflation, the domestic debt has almost doubled worldwide.

Many people are now drowning in debt and because of their everyday living expenses, they’re unable to manage their debts efficiently. If you’re among them, you’ve come to the right place. Here, I’m going to introduce you to some debt plans that can help you eliminate debt effectively:

Debt Avalanche

First and foremost, we’re going to talk about the debt avalanche method. If you have money to make monthly debt payments, you should look into debt avalanche. It’s a debt management strategy that can bring financial discipline into your life.

In this method, you make minimum debt payments for all your debts and the remaining amount goes to the debt with the highest interest rate. Yes, it’s the best option for someone who is worried due to a large amount of interest fee on top of the debt.

Debt Snowball

The second one is the debt snowball method. If the interest rate isn’t an issue and you’re worried because you have multiple small debts hanging on your head, the debt snowball is going to help you out.

In this method, you hit the debt with the smallest amount first. When done, you move to the debt that is the second smallest and the process goes on. If anything, this method keeps you motivated through it all. It provides you with a sense of achievement, so you’re not distracted or bored in-between.

Debt Consolidation

Debt consolidation is another way to deal with your debt. If you’re unable to make monthly debt payments and the interest fee is increasing the amount day by day, debt consolidation can help save the day.

Debt consolidation refers to securing a consolidation loan to pay off your debt in full. It saves you a considerable amount of money which you would have otherwise spent on the interest fee. Also, it comes with a minimal interest rate, which is another plus.

Balance Transfer

Ranking fourth is the balance transfer. It’s an effective approach for credit card debt management. All you need to do is apply for a balance transfer card. It’s pretty easy to get if you have a good credit history.

In this method, you pay off your credit card debt using the balance transfer card. In other words, you’re paying off debt for one card using another. Although it’s discouraged by most banks, it’s a sensible option as credit card debt has the highest interest fee.

Individual Voluntary Agreement

If you can arrange the money but it’s going to take some time and meanwhile your creditor is pressuring you to make debt payments, an individual voluntary agreement is for you. It is the only way to get rid of the harassment and pay the debt on time.

How? Well, an individual voluntary agreement, also known as an IVA, is a legal agreement between you and your creditor. It can help buy you time and save you from aggressive debt collections by your creditor.

Apart from the debt plans mentioned above, I always recommend asking friends and family for help. After all, if your loved ones won’t help you, who else will?