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How to make 2022 the year you’ll be debt free

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Becoming debt free is a dream for many. And it’s a dream you may be able to achieve in 2022 – depending on how much consumer debt (debt you owe for the purchase of goods) you have and your repayment plans.

So, will 2022 be the year you finally say goodbye to your consumer debt? Here are some key questions that can help you determine if it’s possible to be debt free this year.

1. How much do you currently owe?

When trying to figure out if you can be debt free in 2022, you should first take stock of your total outstanding balance. After all, if you owe $20,000 and your annual income is $30,000, it’s highly unlikely you’ll be able to pay off all of your debt in a single year.

If you are unsure of the total outstanding balance, you can find out by logging into all of your credit accounts online or by viewing all of your loan and credit card statements. You can also pull your credit report, which will allow you to see a total list of the current accounts you have. This way you can make sure you don’t miss any when you add up your total debt.

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2. What is your current payment schedule?

After determining how much you owe, consider what you pay each month for your credit balances. If you owe $10,000 and you’re paying $500 a month, you won’t be able to pay off your debt for many years, especially since part of that monthly payment will be used to pay interest rather than reduce your main balance.

Certain debts, such as personal loans, require fixed monthly payments that will allow you to repay your debt according to a clear schedule. But with credit card debt, it can be difficult to know how long it will take to be debt free, as your minimum payment can fluctuate depending on your current balance. The good news is that there are many debt calculators you can use online to estimate when you will be debt free based on your monthly payments.

3. Can you refinance to help pay off your debts?

For many people, refinance current debt may be the best way to make reimbursement cheaper and easier. And depending on your situation, it could even get you debt free in 2022 or soon after.

Refinancing consists of taking out a new loan that is used to repay one or more existing debts. You could use a personal loan and pay off a bunch of credit cards and other creditors. Or you could do a credit card balance transfer transfer money from a high-rate credit card to a card that offers 0% interest on the transferred balance for a limited time.

If you’re considering refinancing, look at the repayment schedule for your new loan and how much you can spend on monthly payments to see if you can be debt-free this year. If you can transfer a credit card balance of $2,000 to a 0% APR card and you can afford monthly payments of $500, you should easily be able to get out of debt this year – even if your new card charges a balance transfer fee – since your monthly payments would be large enough to reduce the principal balance to $0 when you pay no interest.

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4. Can you rework your budget to devote more money to debt repayment?

Finally, ask yourself if you can rework your budget spend more money on debt repayment. The more you can send your creditors each month, the faster the principal balance will drop. If you can send enough money each month to creditors, you should be able to become debt free in 2022.

By following these four steps, you can get a good idea of ​​whether you can make this the year that you will definitely pay off your consumer debt. And remember, even if you can’t fully pay off your balance in 2022, refinancing or paying down your debt can still help free you from that financial burden as soon as possible.

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