There is a good chance that you are looking for debt payment tips to start the year right. It is stressful to have to worry about debt alongside other priorities in life. It might be even pulling you away from some of them. Rather that being able to start with your business, you are stuck with big monthly payments due to multiple debts.
You might not even be able to take up some post-graduate studies because you are still paying off debts. The student loans you racked up from college is still in the way. Your mortgage payments might be taking up too much of your budget. It might not be leaving you with too much to spend on other things.
Experian.com shares that an average consumer could be carrying around $39,216 in debt. That is a big amount that can cripple anyone’s finances. Especially so if you have no idea how to approach repayment. These financial obligations will stay with you all throughout the year and it is best to have a repayment strategy.
There are a number of debt payment tips you can look into to help you get better control of your finances. The crucial thing is to have a genuine desire to pay back what you owe. It would be very hard to even think about repayment when you have no plans of paying them back in the first place.
Once you commit to facing your financial obligations head on, here are a few payment tips you consider. These tips can help you put some structure with the way you approach your repayment.
The Debt Snowball
Debt is a mental game or at least it is for some people. More than having the actual money to meet the payments, mentality plays a big part. This is what debt snowball tries to focus on. It can help people get not only in the right frame of mind. The program can even give people a quick psychological boost to help them with repayment.
The way this program works is that you list down all your debt accounts. However, you arrange them in a way where the smallest ones are on top and the bigger ones follow. You then focus on paying off the small ones first while making minimum payments on the other accounts. This gives you the chance to accomplish three things.
One, it helps you pay off one account on your list. Second is that it gives you that feeling of being able to accomplish a goal. Paying off debt is not something you get to do every day. It gives you a boost and mental win. This can push you to do the same thing for the second item in your list. The third is that it frees up a certain amount in your budget which you can add on to paying off the next debt. A few of this and you get to pay off your entire list in no time.
The Debt Avalanche
This payment tip works almost the same way as the snowball method. You need a list and you pay them down one item at a time. The difference is how you put your list together. Now, you have to prioritize the items with the biggest interest rate. There is a good chance that your cards would be on top of this list.
You then proceed to aggressively pay down the first item in your list while keeping others current with minimum payment. As you do this, you get to pay off the item with the highest interest first. What this does is it helps you save money down the road. The earlier you pay off these types of debt, the less interest payment you have to make. There are ways to help you avoid paying interest fees on credit cards. However, if you already accrued them on your account, the avalanche method is a great way payment tip.
The Debt Snowflake
This payment tip supports either an avalanche or snowball method. What this does is it encourages you to find small ways to save money. You then transfer this small amount, much like how a snowflake amounts to the snow in winter, over to debt payments. The idea is to send it as debt payment as soon as possible. If not, you run the risk of using the amount for other unnecessary expense. This is similar to a snowflake being singled out and melting on its own.
Credit Card Transfer
One payment strategy you can use to lower down the amount you pay every month is card balance transfer. The idea is to look for a low-interest rate card that can assume the balances of your other card. You get to pay less monthly and save money from interest payment. It would be better if you can find 0% interest rate card. Just be sure to pay off the balance before that introductory rate expires. Add the fact that Nasdaq.com shared that you get to enjoy other benefits from the lender. This can include access to ancillary benefits and even improved credit score.
Consolidating debt is one of the great payment tips people use
Debt consolidation is an excellent way of streamlining your payments especially if you are trying to monitor several accounts. The idea is to look for and take out a lower interest rate loan. This would pay off most, if not all your existing debt accounts. You are then left with an easier time in addressing your financial obligations.
As soon as you consolidate your debt, you are now left with a single interest rate to worry about. You also have one payment due date to keep in mind. This makes automatic payment from your account a breeze. The best thing is that you only monitor one payment amount every month. It lessens the chances of overlooking a payment and helps you manage your stress as well.
The Half Payment Method
This is one of the payment tips that a lot of people have a hard time understanding. The basic principle is that you make two payments every month on your debt. You pay half on the first one and half on the second one. This helps save you money in interest payment if they are computed daily. If you look at it as well, you get to make an extra one month’s worth of payment at year end.
Extra principal payments
USNews.com recently shared how making extra principal payments on your mortgage loan helps you save money down the road. One of the most obvious things it brings is it lowers down your principal amount. This is where your interest is based on. The lower the principal, the lower the interest payment. You also allocate more of your money to pay off the actual amount you borrowed. This is better than having to send hundreds of dollars just for interest payment.
There are quite a number of debt payment tips that you can look into to help you address your debt payments. The important thing is to assess your financial situation and identify which one would work for you. You then have to be consistent with the payment until you reach your goal.