How to Be Debt-Free in 5 Years

Yes, it’s 100% possible to be debt-free in 5 years. Of course, it depends on your situation and circumstances, but with the right execution of debt repayment strategies and discipline, it’s possible to be debt-free and have good credit in 5 years.

It boils down to:

• Fixing overindebtedness
• Maintaining consistency
• Being strategic in repaying debt

Financial turbulence can turn into a major life event if left unchecked, which is why it’s so important to plan your finances around kicking debt to the curb. Read on for effective debt repayment hints!

Debt Repayment Strategies

Two debt repayment strategies consistently produce results: the avalanche and snowball methods. People have used these methods for years to pay off debt and reach their financial summit.

The Avalanche Method

The avalanche method is when you start with a small debt, then move on to a bigger one, then pay one even larger than that, and so on. It’s our favourite because we see that it helps to encourage people. Even the small wins can push you to reach a goal.

The Snowball Method

The snowball method entails paying off debts with the highest interest rates first. So, let’s say 20%, then 10%, then 7%, then 3%. This is effective because it helps you save money in the long run and not create even more debt because of high interest rates. It can be discouraging if principals are high because it’ll take longer to repay the debt.

You could also have a look at our debt repayment sample template for extra tips.

What to Do If You Can’t Pay Your Debt

If you can’t afford minimum payments or even living expenses, it’s time to think about debt counselling. Debt counselling is a legal procedure where you collaborate with a debt counsellor to negotiate for reduced interest and debt payments. Your finances are rearranged under the law, meaning you gain legal immunity from creditors and collections agencies.
The process usually takes about 3-5 years. After you’ve paid all your debts and declared debt-free, you get a clearance certificate that you submit to the credit bureaus.

Debt review and the snowball/avalanche methods are great for your credit because they create a positive payment history when you pay off debt. After you’ve paid everyone back, you’re debt-free!

If you need help getting out of overindebtedness, contact DebtCo Group. We’re happy to help you become debt-free–perhaps in less than 5 years.