80% of Americans are in debt, and the average amount owed is $38,000, not including the mortgage. If you include the mortgage, the average debt racks up to $90,460. The money owed on credit cards, personal loans, Hire Purchase agreements and student loans soon adds up, and if the interest rates are high, meeting the monthly repayments can soon become overwhelming. If you want to manage your personal debt and pay off your biggest loans, it is important to sit down and assess what you owe. You can then grab the bull by the horns, begin to make manageable repayments and get on the road to becoming financially free.
Look for competitive rates
The most common type of debts that people have are unsecured debts, which can include credit cards and overdrafts. Unsecured debts can have high interest rates that aren’t always fixed. Finding a lender with competitive rates is essential if you want to pay off your debts quickly. Often you will find that online lenders have lower interest rates than the big banking institutions, so it is worth making the switch. Sit down and make a list of your debts, together with the interest rates for each debt. You should then shop around for more competitive rates. You may even find that consolidating your personal debts, so that they are with only one lender, is more beneficial. It will also be simpler when you are making repayments.
Pay more than the minimum payment
If you only pay the minimum payment each month on your credit card debts, not only will you pay a substantial amount of interest, but it may also affect your credit rating. For example; You have $4,000 on a credit card with a 21% interest rate. The credit card company requires you to make a minimum payment of 1% of the outstanding balance, plus the interest rate. It would take 257 months to pay off your credit card, and you would end up paying $6,374.64 in interest. The original $4,000 will have cost you more than $10,000 by the time you have paid off the money. You should always aim to pay off more than the minimum amount required if you want to get out of debt quickly.
Make a budget and stick to it
Sit down and work out your household income and expenses. When you have done this, you should allocate any money leftover to pay off your debt. Make a payment against your loans as soon as you get paid, don’t wait until the end of the month. Try and stick to your budget, it will help you to keep in control of your finances. If you have the opportunity to pay off any lump sum, then you should do so – this will also help reduce the amount of interest that you are paying.
You will need to be organised and honest with yourself about your debts if you want to get on the road to paying them off quickly. Make a budget and find a lender that offers competitive rates, and you will soon be financially free.