Start paying off your debt quicker
Tackling your debt takes time and effort, but combining strategies and staying consistent can help you successfully dig your way out of debt. Here are some tips to help you get out of debt faster.Pay more than the minimum payment required.
One of the easiest ways to pay off your debt is to increase your minimum monthly payment. Doing so will not only help you save on interest throughout the lifespan of your loan, but it will also speed up the payoff process.
The less you pay toward your debt balances every month, the longer it'll take to pay them off. The interest on your debt can exponentially expand the timeline for your debt repayment, and most debt balances rack up interest charges every month.
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Pay off multiple debt accounts through the "Snowball Method".
If you have multiple debt accounts that you're trying to get settled as soon as possible. The debt snowball method might be the ideal solution for you.
The "Snowball Method" entails paying off the smallest debts first in order to get them out of the way before moving on to larger ones—a "tackle the easy jobs first" approach.
With the "Snowball Method", you will make a list of all the accounts you owe money to, in ascending order of size. Prioritize the debt accounts with the smallest balances, putting as much extra money into each payment as you can afford. On the remaining debt accounts, you only pay the bare minimum amount. When the first debt is settled, then you target the next-smallest one for the extra-payment treatment.
Cut back on unnecessary spending.
Examine where your money is going and distinguish between what is necessary and what is merely a desire. Skip the daily trips to your favourite coffee shop or lunch spot. These savings can add up over time. Use them to dig yourself out of the hole much faster than you anticipated. If you're having trouble deciding which expenses to cut, start by creating a budget.
How to prioritize your debt repayments
It can be a long journey paying off debt depending on the amount of debt you have. Debt can make it extremely easy to lose motivation and give up, especially if you have other financial priorities competing for your limited resources.
Prioritise your debt by understanding what is the amount owed on each account, what the minimum payment is for each debt account, what the annual interest rate is of each debt account and when the payment is due.
Here are some examples of how you can prioritize your debt:
Prioritise your debt by interest rate
By focusing on paying off your debt with the highest interest rate first, you save more money because the interest that's accruing on your accounts will decrease.
Prioritise your debt by balance
When you look at your debt account with the highest balance, you might feel a little discouraged because this debt account is almost certainly paired with the highest interest rate. Instead, prioritize paying off the debt with the lowest balance first, and then work your way up. You may not save as much money this way, but getting out of debt is often an emotional experience and not a logical one.
Read more about the impact of getting a loan while under debt review here