Top 4 Ways for Getting Out of Debt
_There are many options available for anyone wanting to truly get out of debt. If you’re aiming towards a positive goal of debt reduction, then here are our top 4 tips to help you get rid of your debt quickly.
1. Prioritize
Take a long, hard look at your current bills and expenses. Are you paying for extra cable channels you never even use? Could you cut back on the amount you use your cell phone? Would you be willing to give up a night of take-out each week in return for reduced debt balances?
In order to repay your current balances more quickly, you’ll need to prioritize your current spending habits. Only you know what you’re spending, so take note of it and see what you can cut back on.
2. Payments On Time
It is important to make your credit card and loan repayments on time every time. So many people leave their repayments until they’re already overdue and then try to catch up those payments quickly soon after. The banks love this attitude as it means they can charge you penalty interest rates until you catch up again.
Those penalty interest rates can be between 2% and 5% on top of your regular interest charges. They can also charge late fees of up to $25 for being even one day late!
Those extra fees are added to your outstanding balance, so this might mean those fees could take you over your credit limit, which means an overdrawn or over-limit fee as well. By making sure your repayments are on time or paid before the due date, you avoid those fees. After all, they’re better in your pocket than in the bank’s coffers.
3. More Frequent Payments
Banks won’t tell you that you’re allowed to make more frequent payments, but it is possible to really cut down your debt levels quickly and reduce the total interest you pay by making more frequent payments.
Simply divide your regular monthly payment by 4 and then pay this new amount every single week. Your statement has a barcode on the payment slip, so hang onto this so you can use it again, or pay your payments online.
By the end of the month, you would have made 4 small payments that add up to what the bank is expecting, but you’re budgeting smaller amounts of money that are easier to handle. You’re also reducing the amount of interest the bank can charge you at the end of each month.
Another benefit of this technique is that the bank will be forced to report to the Credit Reporting Agencies that you made 4 repayments that month instead of one. This is a big positive if you’re trying to increase credit score.
4. Extra Repayments
This suggestion always brings a round of groans and protests with it. Most people simply don’t have any extra money to make extra repayments. So let’s look at it a little differently.
In the last step, you took your monthly payment and divided it by 4 to find a new weekly payment.
Let’s assume your minimum credit card repayment is $147 per month. If we divide that number by 4 you get $36.75. That’s such a strange number to try to remember. It’s easier to remember $37 per week repayments.
Can you afford 25 cents per week extra? Maybe the option of rounding up to $40 a week is acceptable on your budget.
It seems like such a tiny amount of money, but the truth is your small change can save you literally thousands of dollars in interest charges, overdue fees, penalty interest, and other charges associated with staying in debt.
So if you’re wanting to get out of debt and stay out of debt, then reconsider the way you handle your finances by making some very simple changes like the ones mentioned above.
1. Prioritize
Take a long, hard look at your current bills and expenses. Are you paying for extra cable channels you never even use? Could you cut back on the amount you use your cell phone? Would you be willing to give up a night of take-out each week in return for reduced debt balances?
In order to repay your current balances more quickly, you’ll need to prioritize your current spending habits. Only you know what you’re spending, so take note of it and see what you can cut back on.
2. Payments On Time
It is important to make your credit card and loan repayments on time every time. So many people leave their repayments until they’re already overdue and then try to catch up those payments quickly soon after. The banks love this attitude as it means they can charge you penalty interest rates until you catch up again.
Those penalty interest rates can be between 2% and 5% on top of your regular interest charges. They can also charge late fees of up to $25 for being even one day late!
Those extra fees are added to your outstanding balance, so this might mean those fees could take you over your credit limit, which means an overdrawn or over-limit fee as well. By making sure your repayments are on time or paid before the due date, you avoid those fees. After all, they’re better in your pocket than in the bank’s coffers.
3. More Frequent Payments
Banks won’t tell you that you’re allowed to make more frequent payments, but it is possible to really cut down your debt levels quickly and reduce the total interest you pay by making more frequent payments.
Simply divide your regular monthly payment by 4 and then pay this new amount every single week. Your statement has a barcode on the payment slip, so hang onto this so you can use it again, or pay your payments online.
By the end of the month, you would have made 4 small payments that add up to what the bank is expecting, but you’re budgeting smaller amounts of money that are easier to handle. You’re also reducing the amount of interest the bank can charge you at the end of each month.
Another benefit of this technique is that the bank will be forced to report to the Credit Reporting Agencies that you made 4 repayments that month instead of one. This is a big positive if you’re trying to increase credit score.
4. Extra Repayments
This suggestion always brings a round of groans and protests with it. Most people simply don’t have any extra money to make extra repayments. So let’s look at it a little differently.
In the last step, you took your monthly payment and divided it by 4 to find a new weekly payment.
Let’s assume your minimum credit card repayment is $147 per month. If we divide that number by 4 you get $36.75. That’s such a strange number to try to remember. It’s easier to remember $37 per week repayments.
Can you afford 25 cents per week extra? Maybe the option of rounding up to $40 a week is acceptable on your budget.
It seems like such a tiny amount of money, but the truth is your small change can save you literally thousands of dollars in interest charges, overdue fees, penalty interest, and other charges associated with staying in debt.
So if you’re wanting to get out of debt and stay out of debt, then reconsider the way you handle your finances by making some very simple changes like the ones mentioned above.