If you are trying to find some debt relief in Halifax, it may be of comfort to learn that you are not alone. A 2019 Experian Consumer Debt Study revealed that America has an average of $90,460 in debt, including student loans, mortgages, credit card balances, personal and auto loans. Getting out of debt is a challenging task because, at times, keeping up with monthly bills drains most of our financial resources. This article will provide several pointers to help you climb out of debt and get into a healthy financial state.
Pay Back More Than the Minimum Payments
One of the fastest ways to reduce how much you owe is to prevent your current debt from accruing steep interest. All debt has a minimum periodic (usually monthly) payment that the creditor must pay. If you can pay more than the minimum obliged amount, you will save money and get out of debt faster by reducing the amount owed and interest accrued.
It is advisable to go through your budget and allocate the maximum amount possible to repay your debt. You can use an online credit card payoff calculator to see how much interest and repayment time you will save by increasing your monthly payments. For example, if you owe $15,000 at an interest rate of 17% APR with a $450 monthly minimum payment, you will finish off the debt in four years and pay $5,500 in interest. Paying $100 above the minimum at $550 per month will see you pay off the debt in three years and only cost you $4,100 in interest.
Use the Debt Snowball Method
Anyone paying more than the minimum obligated payment can use the debt snowball method to reduce their debt. This method entails paying the minimum obligated figure for all your debts except the smallest one, which you will allocate as much money as possible toward. When you snowball repayments toward your smallest debts, it will be possible to pay them off quickly and move on to the subsequent smallest debts and then keep repeating the cycle until you are debt-free.
This method motivates you and helps build momentum by allowing you to concentrate on one debt at a time. For example, if you have $10,000 student debt, $5000 credit card debt, and $1000 auto loan, it is wiser to begin by paying off the auto loan first because it will be faster and easier to complete. The only instances where the snowball method is not advisable are title and payday loans because they have very high-interest rates and should be repaid as soon as possible.
Refinance Your Debt
Refinancing your debt to a lower interest rate is an excellent way to save a lot of money in interest and help you repay the debt faster. Mortgages, auto loans, personal loans, and student loans can be refinanced. The best way to refinance your debt is through a debt consolidation loan. This personal loan offers a lower interest rate than your current debt. An excellent way to get a break from your credit card debt is to transfer it to a balance transfer card which will have a 0% APR for six to eighteen months.
Commit Any Windfalls to Debt
While climbing out of debt, you will learn better financial management skills and make significant sacrifices. A great way to significantly reduce your debt is by paying up in lump sums whenever possible because this saves you a lot of time and money in interest. You can resolve to commit any windfalls you get for repaying your debt. When you receive a stimulus check, tax refund, or cash gift, you should resist the temptation to splurge on yourself and instead assign the money to repay your debt. If this seems a little drastic, you can compromise by setting half to debt repayment and half to any other use you deem fit.
Settling For Less Than You Owe
An intelligent way of getting out of debt is negotiating with your creditors. Third-party companies specialize in organizing debt settlements, but you also save the facilitation fee by doing it yourself. You can call your creditors and arrange a meeting where you settle your debt for less than you owe. While escaping old debt by paying less than you owe seems very smart, a few risks are involved. The Federal Trade Commission has warned consumers that their credit scores may be negatively impacted when they stop repaying their debts in the timeframe for negotiation with a debt settlement company.