Posted: August,21, 2024
Living with debt can feel like an ongoing worry, affecting both your monetary and mental health. The good news is that financial freedom is possible with the right strategies and perseverance. Read on for our practical steps and top tips to help you achieve financial independence, get out of debt, and take charge of your future.
- Pay more than the minimum
The quickest way to make a dent in your debt is to pay more than the minimum amount every month—which will also cut down on the amount you pay in interest. If you can double your minimum payment, that’s great! If you can only afford to chip in an extra $50, that’s OK, too.
- Make payments more often
For credit cards especially, try to make more than one payment per month. Not only will this help you keep track of your balance, it will also help you understand your balance/usage ratio, or the percentage of your available balance being used. This is also an important factor used in determining credit scores, so it’s smart to keep track.
- Pay your largest debt first
It’s not uncommon to carry debt on a credit card or two, as well as have student or other loans. Your most expensive form of debt is the one with the highest interest rate—usually a credit card. Try to pay these down first to avoid being clobbered by interest rates. Then, move on to the loan with the next-highest interest rate—this is known as the avalanche method.
- Pay your smallest balance first
Similar to the avalanche method, the snowball method focuses on paying off your smallest balance first, then applying your efforts toward the next-lowest balance, and so on. This will help you build momentum and feel like you’re making an immediate impact on your debt.
- Use tools at your disposal
Take advantage of things like automatic bill pay, online payments and payment reminders to help keep you on track. Check your balance regularly so you know exactly what’s coming in and what's going out.
- Refinance your loan
In some cases, you may be able to refinance and shorten the term of your loan. Your monthly payments will likely increase, but you will also pay off your debt faster. Depending on the type of the loan, you may also qualify for a lower interest rate or longer loan term.
- Consolidate debt
Loan consolidation involves combining several high-interest loans or credit card balances into one new loan with—fingers crossed—a lower interest rate. Take advantage of that lower interest rate to pay as much as you can as long as you can, because sometimes those rates increase after a set period.
Have questions or need additional help? Contact WaterStone Bank to learn more.
