How To Pay Off Your Debt Easier

Written by: April Lunar
06/08/2019

pay-off-debt

Research reveals that the average household debt today is over $ 96,000, or 197% of average income.

Everybody wants to pay off debt as soon as possible, but the trick is doing it smartly. All the time you hear experts talk about how to get out of debt, self-help debt reduction, fix your credit score, and so on. They are well-meaning, but there is a problem: the way they explain things it is as if they expect you to hold a degree in high finances. What you need is practical and to-the-point tips and highlights that address particular issues like stopping debt collector’s harassment. If you desire to get out of debt, there are many ways to put in place to get there. Each strategy can have a significant impact on your finances if you get serious about it and are ready to follow your plan. But the question often remains, “where to start”? Thus, in this article, we offer nine killer tips for paying off debt and staying out of it.

Create a strategic spending plan

First, take a piece of paper and draft out your income once the taxes and all expenses are removed, indicating the minimum payments made each time. Sort your costs by their importance and analyze the expenses at the bottom of your list to see if they are really needed. The goal here is to create a plan where your expenses are lower than your income.

You can complete this plan by allocating a budget for each type of expenditure (rent, groceries, outings, clothing and so on)

Make a list of all your credits

Make an inventory of everything you need and indicate the interest rate for each entry (credit cards, mortgage, car loan, and so on). You can classify them from the credit with the highest or the lowest interest rate to prioritize their repayment.

Choose a repayment strategy

You can either choose to pay the minimum amount on all your credit cards except on the ones that have the lowest interest rate or pay the minimum amount on all your credit cards leaving out the one with the highest interest rate. In the first case, it is the Snowball method, and in the second cases, the Avalanche method. This choice really depends on your personality.

If you adopt the Snowball method, you focus on the debt with the lowest interest rate. By choosing to start this way, you will take longer to repay your debts, and the overall interest rate will be higher, but the effects are seen more quickly, encouraging you to continue this way.

If you adopt the Avalanche method, you focus on the amount with the highest interest rate. You then choose to get rid of the most significant debt as soon as possible by adopting higher payments. Once this debt is paid, you can move on to the next debt and continue so on until you have paid off all your debts.

These are just two of the many strategies. Feel free to inquire to choose the one that suits you best.

Use a debt payment calculator

By returning all your amounts in the calculator, the latter offers various strategies to implement and a payment plan indicating the amount you must give each month to each of your creditors. You can use the one from CalcXML or the credit card payment calculator set up by the government

Choose bi-weekly payments

By making a payment every two weeks and not once a month, you can actually segment your expenses and add an additional month to your repayments each year (you will make 26 payments or 13 months of repayment)

Automate your payments

If you are pretty uncomfortable enough with the organization, you can set up automatic debits between your creditor and your bank. You can choose the withdrawal amount and date to make sure there is enough money in your bank account.

Learn about interest rates

It is possible to take advantage of lower interest rates, but for that, you have to ask. If you have a good payment history, some creditors may offer you a discount (all you need to do is “just threaten to go elsewhere”). If nothing is done, you can choose a credit card with a lower interest rate and transfer your balance. Read the conditions of your new bank carefully in order not to have any surprise.

You can also opt for debt consolidation, which allows you to consolidate all your debts with a lower interest rate. However, your credit report must not be too “catastrophic” to be accepted.

Reward yourself!

You can set up milestones and rewards that you grant once you have achieved them. It does not have to cost you money, but it keeps you motivated. This is important because you may face an unforeseen expense that can make you give up.

Avoid bad habits

Once you start paying off your debts, you should avoid contracting others. To do this, you can set up a few small techniques such as paying for your purchases through cash or using a debit card, do not succumb to offers “buy now, pay later” and especially respect your budget by not spending more than what you earn.

Paying off your debts is a long-term job. If you feel that you are losing ground or if you do not feel able to handle this situation alone, do not hesitate to consult a professional. It is undoubtedly an investment, but that will allow you to make the right choices in the repayment of your debts.


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