Escape high-interest debt quick to free up cash fast

Dubai: Carrying high-interest debt can feel like a never-ending uphill battle. Whether it’s from credit cards, personal loans, or unexpected expenses that spiraled out of control, tackling debt with a solid plan can make a world of difference.

The good news? With the right approach, you can pay off your debt faster and free up cash to focus on what truly matters.

Start with a plan and stick to it

When it comes to paying off debt, winging it just won’t cut it. The first step is creating a game plan and committing to it. This means taking a close look at all your debts, understanding the interest rates, and setting realistic goals. Consistency is key - every extra dirham you put toward paying down debt brings you one step closer to financial freedom.

Tackle debt strategically

If you have multiple debts, choosing a repayment strategy that works for you can make all the difference. Here are two popular methods to consider:

Start by listing all your debts and noting their interest rates. Focus on paying off the debt with the highest interest rate first while maintaining minimum payments on your other debts. This approach minimizes the amount of interest you pay over time and helps you become debt-free faster.

If you need a quick win to stay motivated, the snowball method might be for you. Pay off your smallest debt first, regardless of its interest rate. Once that debt is gone, roll the amount you were paying into the next smallest debt. The satisfaction of eliminating a debt quickly can give you the momentum to keep going.

Why paying more than minimum matters on big debts

Paying only the minimum amount due each month might seem manageable, but it can keep you trapped in debt for years. By paying more than the minimum, you can reduce the overall interest you pay and chip away at the principal balance faster. Even an extra Dh500 or Dh1,000 each month can significantly accelerate your debt repayment.

When it’s worth considering consolidating your debt

If juggling multiple debts is overwhelming, debt consolidation could be a smart move. By combining several high-interest balances into one with a lower interest rate, you can streamline your payments and potentially save money. Here are two common consolidation options:

If it’s more than one credit card debt you are looking to consolidate, you can transfer high-interest debt from multiple cards to a single card with a lower interest rate, often with an introductory 0% APR period. This can help reduce interest costs and simplify payments, but watch out for transfer fees and ensure you can pay off the balance before the promotional rate expires.

Banks will also let you easily switch banks when you have loan payments i.e. a loan transfer. But in the UAE, this involves paying of an early payment fee not exceeding 1 per cent of the outstanding balance of the loan, or Dh10,000, whichever is less.

What typically happens for a loan transfer from one bank to another is that your new bank pays off your existing loan. If your current loan comes with a prepayment clause, you may have to incur those charges. Also, you may have to pay the processing fees for your new loan.

This a personal loan used to combine multiple high-interest debts into a single, more manageable loan. Typically, this loan offers a fixed interest rate and a set repayment term, which helps create predictable monthly payments and makes budgeting easier. By consolidating your debts, you may also reduce your overall interest costs, especially if the new loan offers a lower rate than your existing debts.

This can simplify your financial life by reducing the number of bills you need to manage each month. Instead of juggling multiple payments with varying due dates and interest rates, you’ll make just one payment. Many lenders offer flexible repayment terms, allowing you to choose a timeframe that suits your budget – whether it’s a shorter term to save on interest or a longer term for lower monthly dues.

However, it’s vital to note that while a debt consolidation loan can provide relief, it won’t eliminate debt on its own. You’ll need to avoid taking on new debt and remain disciplined with your repayment plan to ensure you don’t find yourself in the same crunch again. Also, some loans may come with origination fees or penalties for early repayment, so it’s wise to compare offers carefully before committing.

Key takeaway?

Getting out of high-interest debt might seem daunting, but with discipline, a clear strategy, and a bit of patience, you can do it. The sooner you start, the faster you’ll regain control of your finances—and the peace of mind that comes with it. No matter how big or small your debt is, every step forward is a win!