Getting out of debt can feel like a struggle, if not impossible. Every month new surprise expenses can throw your plans for a loop, and it’s easy to spend more than you can afford when you don’t have a budget.


If you’re watching your credit card bills get out of control, have a large line of credit that you need to pay back, or you’re relying on payday loans to get by day-to-day, there are ways to get out. It’s never impossible to put debts behind you.


No strategy is one-size fits all. What may work in one situation won’t in another. It is therefore better to consult a bankruptcy lawyer for guidance. That said, these are 5 of the most effective strategies for paying back large loans.


#1 Consumer Proposal


When you cannot keep up with loan repayment, the most effective strategy for getting out may be a bankruptcy alternative like a consumer proposal. A consumer proposal is ideal for people who have a steady income and don’t want to surrender assets that might be used to settle a bankruptcy, such as:


  • Non-exempt home equity;
  • Recent contributions to retirement savings;
  • Vacation properties or second homes;
  • Second vehicles;
  • Artwork and jewelry.


A consumer proposal gives you a chance to catch up by reducing what could be a significant portion of the amount you owe and pressing pause on interest charges and collection actions. You can contact a professional online to learn more about consumer proposals.


#2 Get Lower Interest Rates


If there’s a major downside to consumer proposals, it’s that any debt relief comes with a big hit to your credit score. Future lenders will be able to see it for years to come (the length of time varies depending on where you live). One alternative option could be negotiating lower interest rates with your creditors.


You can do this by transferring your balance to a lower-interest card or contact your lender and request a lower rate. The downside here is that it’s your creditors don’t have to offer you anything, and if you owe multiple parties, you may get mixed results.


#3 Pay More than Minimum


Minimum payments are designed to keep you owing for longer and maximize the amount you pay in interest. It can take years to pay off even relatively small amounts with minimum payments. The more you put toward a balance each month, the cheaper the final cost of that loan will be.


#4 The Snowball Method


You may not be able to pay more than minimum for one balance at a time. So how do you choose which one to eliminate first? One way is the snowball method, where you eliminate the smallest balances you have first.


Seeing each of those cards get paid off can give you the motivation to keep going. Tackling the biggest balances first can take a long time and make you feel like you’re not making progress. The snowball method helps you stay on track.


#5 Create a Spending Plan


If budgeting were easy, everyone would do it. But virtually every financial expert says that if you want to get out of debt, you need to keep an eye on how much you spend. Whether you’re trimming expenses or simply setting limits for how much you can spend each month, it will help you to free up income that can go toward paying down loans.


Getting out of debt is possible, no matter how much you owe. The best strategy for you may depend on your situation and your personality.

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