Paying down debt faster can help you get ahead of your goals, whether it’s applying for new credit, saving on the cost of borrowing, or just reducing your debt. Here are some simple tips and strategies to consider when thinking about repayment plans that could help you pay your debt off faster.
Getting out of debt can be a struggle, but with these proven strategies you will come out the other side a brand new person with a whole new lease on life.
#1 - Pay More Than Just The Minimum
Pay off your debt and save on interest by paying more than the minimum every month. The key is to make extra payments consistently so you can pay off your loan more quickly. Some lenders allow you to make an extra payment each month specifying that each extra payment goes toward the principal. Before you begin, check the terms of your loan to determine whether additional fees or prepayment penalties may apply.
#2 - Pay More Than Once In a Month
Pay your credit card bills more than once per month. This can make it much easier to stay ahead of how much you owe. Paying your credit card bill can also lower your balance/utilization ratio. The credit utilization ratio is the percentage of your total available credit that is being used. The utilization ratio is one of the components used by credit reporting agencies to calculate your credit score.
#3 - Pay Off The Biggest Debt First
Your biggest debt is the debt with the highest interest rate. By paying it off first, you’re reducing the overall amount of interest you pay and decreasing your overall debt. Then, continue paying down debts with the next highest interest rates to save yourself some money. This is called the “avalanche method” of paying off debt.
#4 - Use The Snowball Method
The "snowball method" is when you start with your smallest balance first, paying that off and then moving that same payment towards the next smallest balance as you work up to the largest balance. This method can help you build momentum as each balance is paid off.. Like a snowball rolling down the hill. Gaining momentum as it goes.
#5 - Pay Your Bills On Time
This may seem like an obvious statement but this is where things can go sideways. So stay on top of your debt by setting yourself reminders. Just schedule the amounts you want to pay and when you want to pay them.
Debt can be overwhelming but with a little discipline and some simple strategies in place you will see those debts disappear.