Debt Payment Strategies – 9 Steps
Debts can be challenging to deal with, especially when there are several piled up. It can feel like you’re never going to get debt-free, but with a few tricks you can pay them off. The first thing to do is to develop Debt Payment Strategies to help you with a plan. If you’re in trouble and don’t know how you’re going to pay them off, we have created a list of 9 simple debt payment strategies that should help.
Create a Budget
The first step to solving your problem is to create a budget if you don’t already have one. You can use an online tool or a software application such as an Excel spreadsheet to work out your monthly income and expenses. Create a budget to make better decisions about your money. It will give you a better idea of where you can cut costs and how much money you can afford to put forward to make monthly payments. Make sure you establish a realistic budget so that you can try to stick to it without getting stressed out.
Focus on One Debt at a Time
No matter how hard you try to pay a little extra on each, the balances never seem to change. The results are hard to see when you spread out an extra $20 or $50 on each, but if you pay $200 or $500 on one it is noticeable. So focus on one debt at a time because it is easy to see real progress happening on your goals. You’ll be motivated to see the results and want to keep the progress going.
Pay Off the Most Expensive Debt First
Pay off the most expensive debt first. If you have more than one, pay off the balance on the debt with the highest interest rate while continuing to make the minimum payment on the rest of your debts. If you have some extra cash then paying off the debt with the highest APR first will save you money over time and clear the debt quickly.
Pay More Than the Minimum Balance
Paying only the minimum payment is not going to get your debts paid off soon. It could take many years to pay off your debts especially if you are paying only the minimum payment because it means you’re just paying interest on your debts. You need to pay more than the minimum balance on your credit card statements to pay off debts quickly and save money that would be paid on interests. If your minimum monthly payment amount is $50 and if you can pay an extra $10 or $20 month, you’d reduce the repayment period.
Put any Extra Cash toward Debt
Put any extra cash or unexpected income toward debt. Some sources of extra or unexpected income could be refund checks, work bonuses, tax refunds, etc. If you receive a job bonus, don’t use bonuses, tax return, etc. for splurges (e.g., on a vacation or any luxury purchase) or treats. Put it toward debt instead because it’s more important to get debt-free than splashing your bonus.
Find Ways to Increase Your Income
Making more money means you’ve more money available to pay off your debts. There’re many ways to increase your income these days. You can take on a second job, work overtime at your current job, do freelance work, sell things that you don’t need or use anymore or sell things that you buy at cheap price and sell them for a profit on eBay or Craigslist, make money from a hobby, running errands or starting a small business.
Take Advantages of Balance Transfers
If you have a high-interest rate credit card, take advantages of balance transfers by moving the debt to a 0% interest balance transfer credit card. Make sure to pay off the debt before the balance transfer expires. You can save a lot of money on interest this way.
Consolidate Your Debts
If you’ve multiple debts with a high-interest rate on each of your debts, it’s worth considering options. A personal loan with lower interest rates to consolidate your debts is an option. This type of personal loan is called a debt consolidation loan used to consolidate your existing debts. It makes one monthly repayment of your existing debts and clears the debts over a certain period of time.
Debt consolidation loans usually charge a high-interest rate. They also spread your repayments over a long period of time. So taking out a personal loan to consolidate your debts is only worth considering if it offers lower interest rates than your current loans.
Pay Off Your Debts before Saving
Debt payment is number one. While it’s good to have an emergency savings fund for use in emergencies, don’t save money if you’re in debt. Make a debt payment and get rid of it before you save toward having a financial cushion. Besides, the rates available on the best savings accounts available are lower than the average interest rate on a credit card. If you already have savings, use them to pay off your debts. It could save you a lot of money in interest charges.
In Conclusion
These are our 9 Debt Payment Strategies, intended to help you form a plan. The length of time it takes to pay off your debts depends on your goals. Your situation will depend on which debt payment strategies you will follow. Whatever you do, get into a responsible spending habit. Find ways to earn extra income, use your savings, pay on time, pay more than the minimum amount on your credit card and pay off the most expensive debt first to speed up your repayments for all your debts and get out of your hole. For more information, you can also read.
