There’s no worse feeling than trying to pay down debt that is quickly spiralling out of control. If you’re feeling overwhelmed by the amount of debt you have, there is a solution. Take control of your money and secure a more stable financial future with these 5 strategies that can make paying off your debt faster and a lot less painful.
1. Pay more than the minimum owing
Sounds simple, right? But the fact is, many people simply pay the minimum balance which can take years to pay back. Even longer if you’re still spending and adding to your debt each month. Whether it’s credit card debt, a personal loan, or a student loan, one of the best ways to pay down your debt faster – and cut down on the interest you’re being charged - is by paying more than the minimum balance due.
2. The snowball method
Start by writing down the total amount owing for each of your outstanding debts – credit card, mortgage, personal loans and so on. Whichever account has the smallest balance is the one you’re going to focus on.
Make additional payments into this account to clear this debt in full while paying the minimum balance owing on the rest. Then the next smallest balance and the next until eventually your debt is cleared. The snowball method helps you to stay motivated as over time your small balances disappear and you’re left with more cash to tackle the larger debts.
3. Pay the highest balances first
Similar to the snowball method but in this case you’re focusing on paying off the higher interest balances. While this method can help you stay motivated as you clear and close credit accounts, it also helps reduce your interest charges, particularly those high interest accounts like credit card or personal loan which may be offsetting all the hard work you’ve put in trying to clear your debt.
4. A bare-bones budget
Cutting your expenses is the obvious solution, but not as easy as it sounds. If you’re in debt and consistently struggling to meet your repayments, it’s time for a change. Look at how you’re spending your money each day and evaluate whether those purchases are really necessary. If you can cut them out, then do it.
Create a bare-bones budget to try to keep your expenses as low as you can get them by living on as little as possible for as long as you can. That might look different for everyone but it’s important it’s free of any “extras” you can do without. Freeing up some extra cash in your bare-bones budget means you should be able to pay considerably more towards your debt.
5. Check your interest rates
If the interest rates you’re being charged make it near impossible for you to get debt-free, consider consolidating your debt or negotiating a better interest rate. With either of these two options, a Mortgage Express adviser can assist you in finding a viable financial solution.
In many instances, the lending panel we work with can help you combine your high interest loans into a lower interest loan with a longer loan term to make repayments more manageable.
If you’d like to find out more about any of these options, get in touch with our team today by completing this online form.
The information contained in this newsletter was prepared by Mortgage Express Limited. While every care has been taken to supply accurate information, errors and omissions may occur. Accordingly, Mortgage Express Limited accepts no responsibility for any loss caused as a result of any person relying on the information supplied in this newsletter.
This newsletter does not constitute regulated financial advice to retail clients. It may not be relevant to individual circumstances. Nothing in this newsletter is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this newsletter.
A disclosure statement is available on request and free of charge.