Carrying around the burden of debt is never easy but there are ways to help lessen the pain of paying. Here are some simple suggestions to help you pay down your debt and get on a path to financial well-being.
1. Refinance your loan
If your monthly payments seem unrealistic then refinancing could extend the term of your loan or lower your interest rate. Here’s an example of what extending your term by 12 or 24 months can do for you:
If you have a loan balance of $30,000, at an interest rate of 5% and you’re approved to extend your loan by another 12 months, your monthly payment will be $83 less. If you extend it by 24 months, this’ll lessen the payment by $142 less per month – that’s a 25% reduction.*
Sure, you’ll have the loan for longer but it’ll take some of the financial pressure off every month.
Make sure to research and explore all your options, refinancing isn’t right for everyone. There are a lot of things to consider especially when you’re refinancing important loans like the one for your car.
2. Rank your debt
You have to make a plan if you want to achieve any goal. So, start by taking inventory of how much you owe and the interest rate of each debt. Then rank them from smallest to largest or highest to lowest:
Highest to lowest
Pay off your highest debts first. In the end, you’ll save money on all the interest you would’ve been charged if you took your time.
Smallest to largest
Pay off your smallest balance first, for example, the small amount you owe on a credit card. It’ll encourage you to keep going. This called the “Debt Snowball” effect. It can have a powerful psychological effect when you quickly see your hard work paying off.
3.Automate your payment
It’ll hurt a little less if your payments are automatically deducted.
Set up the payments to be automatically withdrawn bi-weekly and align it with payday. Like taxes, when you automate a payment, you’ll hardly have time to notice what you’re missing. Plus, if you make payments more often, you’ll pay less interest.
This’ll ensure you don’t miss a payment. It’ll also make it harder for you to skip or lessen a payment when your budget is tight.
Pro tip: What’s an extra $15 a month? Will you miss it? Probably not. Rounding up by a small amount on your recurring payment will help you pay off your loan quicker.
4. Consolidate your debt
Package up your loans, credit card debts, and other balances owing into one single loan. It’ll save you the time and energy. You won’t constantly have to account for all the different balances, different due dates and different payment amounts.
Why this is helpful:
- You’ll have one single payment.
- There’s only one interest rate to worry about.
- You’ll start to see a difference in your balance quickly which is always encouraging.
Need help creating a realistic plan to pay down your debt? We’re here to help. Let’s chat.