Paying off debt should be a top priority no matter how large your balance or balances are. By eliminating the obligation to make payments to lenders, you keep more of your hard earned money in the bank. This can be used to save for retirement, build an emergency fund or otherwise secure your financial future. What are some ways to pay off your debt as fast as possible?
One option is to refinance your loans so that they have a lower interest rate. For example, if you have an outstanding credit card balance, try to transfer it to a card with a 0 percent interest rate. You could also choose to get a personal loan to pay off the credit card balance. Compared to a credit card, the personal loan would have a lower interest rate and a shorter repayment period. It may also be possible to consolidate debt by using a home equity loan or line of credit.
Paying down the loans with the highest interest rates means that more of your subsequent payments go toward paying off principal balances. This ensures that you pay off your debts in a shorter amount of time and pay less to do so. To determine which of your debt balances has the highest rate, get a copy of your credit card, auto loan or other loan statements. It should list your interest rate as well as how often it compounds.
By paying more than the minimum payment each month, you reduce the principal balance owed to a lender. Since your principal balance is lower, the amount of interest that you will be charged will also go down each month. An easy way to pay more toward a debt each month is to make payments on a biweekly basis. This will result in making 26 payments per year, which is equivalent to 13 monthly payments.
If you owe money on a home or car, it may be possible to sell or trade it to get out of paying the remaining balance on that debt. This may be especially helpful if the asset is worth more than what you owe. The equity in your car could be used as a down payment on your next vehicle or used to pay for public transportation. Equity in a home could be used to buy a less expensive property or to pay your rent for the next several months or years.
This is a step that you should only take if you have no other way to pay off what you owe in a timely manner. In many cases, debt forgiveness can have a significant impact on your credit score. Furthermore, it may only be allowed if the debt is unsecured. However, it may not be as drastic as filing for bankruptcy, and it can help reduce your debt in a matter of minutes. Depending on your current financial situation, a creditor may allow you to settle a debt balance for pennies on the dollar.
A credit counselor will work with you to develop a budget and find ways to pay down you debts in a timely manner. For instance, you may be able to cancel a gym membership or cut your Amazon shopping budget in half each month. A credit counselor may also suggest using cash for purchases instead of putting them on a credit card. Prepaid debit cards can be ideal for those who need help sticking to spending limits.
If you have an extra room in your home, you could choose to rent it out on a weekly, monthly or annual basis. Ideally, you will have a tenant sign a lease as it will codify his or her responsibilities for however long he or she chooses to live in your home.
Paying off your debts can help you live a better life. Instead of worrying about phone calls or debt collection letters, you can look forward to vacations or finally being able to go to college. With increased financial security, you are now in control of your life and what you do with it.