How to Pay Off your Debt
So, you want to pay off your debt. I do too, that’s what happens after you go to school for a long time. But, paying off your debt takes time and a plan. I’m still working on my school debt, but eventually I’ll get past all of it and be debt free!
Does it seem a long way off for you too? Well, there’s no need to be intimidated. Today, we’re going to look at three tips for anyone who is trying to pay down debt.
1. Don’t pay minimum payments. Don’t just pay that minimum payment. You can end up paying two or three times as much as you borrowed and/or put on credit! Pay a little extra if you can, even if it’s 5 or 10 dollars.
2. Prioritize. Priorities are vital in paying off debt. If you have several accounts, pay off the lowest balance with the highest interest first. For example, if you have two loans and a credit card: one loan is $1000 with 5.3% interest, the other loan is $500 with 4.1% interest, and the credit card is $250 with 16% interest, get that credit card out of the way first. Focus a majority of your paying off efforts on that, then follow the last piece of advice…
3. Transfer payments over. Say that I’m paying off that credit card by paying $55 a month over 5 months instead of the $20 minimum payment. After 5 months, I pay off that card. Now I have $55 to pour into the $500 loan, alongside the minimum payment. You’re still paying the same amount that you were when you still had credit card payments, but instead, you’re focusing that money into a different loan.
4. Consider consolidation. Many financial institutions offer consolidation loans to help you get out of debt by making one monthly payment. These can be a little risky; make sure that you are getting the loan from somewhere that you trust and that you have someone helping you through the whole process. Sometimes, the interest rate on these is lower as well, helping you not pay bucketloads of interest by the time that everything is paid off.
5. Consider counseling. Extreme debt (other than school loans; those are a totally different ball game) can be a sign of a variety of different issues. I’m not saying that you definitely have a problem, but if debt is an endless cycle that you really can’t seem to stop, you may be having some emotional issues. I had a friend tell me that everyone should go to counseling at least once in their lives, because we all have issues. And I really think he’s right; counseling about your spending habits may not be a horrible idea in the realm of things.
How much debt do you have to pay off? What struggles have you had with it? What advice do you have for those struggling to pay their own debt down? If you’re on the other side of the coin, what struggles are you having? Would you need more advise to be able to make it through your debt issues? Leave some thoughts in the comments and until next time, spend smart, save smart!