Boo! Does debt scare you? Here's how to pay it down.
Don't let your debt haunt you!
Halloween is just around the corner, and while ghosts might give you the creeps, there's something even scarier lurking in the shadows: debt. It's the kind of fear that can haunt you long after the Halloween decorations are put away. But don't fret! We've got some spooktacular strategies to help you regain control over your debt.
Review your spending
- Review your budget: Create or alter your budget to keep your finances in check. List all your income and expenses, including bills, groceries and entertainment. Examine it closely to identify areas where you can cut back and direct those funds toward paying off your debt.
- Eliminate extra expenses: Identify unnecessary expenditures that have been lurking in the shadows of your bank statement. It might mean canceling unused or unnecessary subscriptions, dining out less or finding cheaper alternatives to your usual activities. The more you save, the more you can allocate toward debt repayment, and every penny can make a difference towards decreasing those interest fees.
- Stop using credit cards: Quit the credit card habit. Relying on credit cards can lead to impulse purchases and high-interest charges that will make your wallet scream. Instead, pay for things with cash or a debit card to keep your spending in check.
Target one debt at a time
Debt can feel like a never-ending horror, but you can fight back! First, you need to find and list out all of your debts and understand how they work. Next, instead of trying to slay all your debt at once, concentrate your efforts on one at a time. Here's how:
- Snowball method: This approach involves paying off your smallest debt first. Once you've vanquished it, take the money you were putting into that debt and redirect it toward the next smallest debt. This may cost you more money interest in the long run, but this method helps to keep you motivated and feeling accomplished.
- Avalanche method: The avalanche method focuses on the debt with the highest interest rate. You would pay your minimums on all your debts, but put extra money towards the debt with the highest interest rate. Once you've paid off that debt, you would move on to the debt with the next highest rate. Because you are prioritizing your most expensive loans, you save more on interest in the long run.
Pay more than the minimum
Paying only the minimum on your debts isn't going to get you very far. Payments beyond the minimum requirement goes directly toward reducing the principal amount, helping you escape debt faster.
Consolidate your debt
If you feel like you're surrounded by an army of debt, it might be time to gather them all in one place. Debt consolidation takes your high interest debt, like your credit card balances, and rolls them into one monthly payment - hopefully at a lower interest rate. This not only lowers your interest rate, but makes your debt and payments easier to manage.
- Balance transfers: Use our free balance transfer calculator to see how much you could save by consolidating your credit card debt.
- Debt consolidation loan: Consider taking out a personal loan(Opens in a new window) from Southland. The loan will provide you with the funds you need to pay off your credit card bills and leave you with a single, low-interest monthly payment.
Consider debt relief
Sometimes, debt can be so haunting that you need to call in the experts. Debt relief methods can help exorcise your financial demons:
- Negotiate with your creditors: Many credit card companies are willing to lower your interest rate once you prove you are serious about paying down debt. After kicking off your debt payment plan, it’s worthwhile to contact each credit card company to discuss your options. At the very least, see if you can get the company behind the first debt on your list to lower your rate.
- Debt counseling: Debt repayment can be overwhelming, and it may help to have some support. Work with a financial counselor who can help you create a personalized plan to tackle your debt. One option is contacting the National Foundation for Credit Counseling to receive free help with debt management.
“This is a network that’s not for profit, and it's a place for people to get help,” Joseph Goetz, founder and chief information officer of Elwood & Goetz says. “A lot of people end up going to for-profit entities, as there’s a huge amount of fraud taking place for people who are vulnerable and have large amounts of debt.”
- Debt settlement: Debt settlement services offer to lower your interest rates and boost your credit score in a short amount of time – for a fee. Unfortunately, though, many of these companies are fronts for scammers and should be avoided. Do note, though, that there are legitimate debt settlement companies, so do your research well if you are thinking of using one.
- Bankruptcy: This should be considered as a last resort, but it is an option to help those who can no longer pay their debts get a fresh start by liquidating assets to pay their debts or by creating a repayment plan.
Are you ready to put your debt to rest?
You don't need to be spooked by debt all year long! By taking advantage of the resources and steps above, you can banish debt from your life.