Debt is a common reality for many people, whether it’s from credit card balances, student loans, or other forms of borrowing. While debt can be a useful tool for financing big purchases or investments, it can quickly become a burden if not managed properly.
If you’re looking to take control of your debt and get on the path to financial wellness, here are some strategies for paying off your debts.
- Create a budget
A budget is a key tool for taking control of your finances. By creating a budget, you’ll be able to understand where your money is going and identify areas where you can cut back. This extra money can be used to make extra debt payments, reducing the amount you owe and helping you get out of debt faster. Start by tracking your spending for one month to get a good idea of where your money is going with the LOOP Budgeting feature. From there, you can create a budget by dividing your expenses into categories, such as housing, transportation, food, and entertainment. Once you have your budget, you can adjust your spending in each category to free up extra money to put towards your debt.
- Prioritise your debts
If you have multiple debts, prioritize them based on interest rates. Paying off debts with higher interest rates first will save you more money in the long run, as the interest on these debts will accumulate faster. For example, if you have a credit card with a 20% interest rate and a student loan with a 5% interest rate, focus on paying off the credit card debt first.
- Make extra payments
Even small extra payments can make a big difference when it comes to paying off debt. Consider making bi-weekly payments instead of monthly payments or making an extra payment each quarter with the LOOP Standing Order feature. This will reduce the amount of interest you owe and help you pay off your debt faster.
- Consolidate your debts
If you have multiple high-interest credit card debts, consider consolidating them into a single loan with a lower interest rate. This can make your debt more manageable and help you pay it off faster. You can consolidate your debts through a personal loan, a balance transfer credit card, or a home equity loan. Just be sure to compare the interest rates, fees, and terms of each option to choose the one that’s best for you.
- Use the debt snowball method
This method involves paying off your smallest debt first and then using the extra money to pay off your next smallest debt, until you’ve paid off all your debts. This can help you build momentum and give you a sense of accomplishment as you pay off each debt. By focusing on one debt at a time, you can stay motivated and make steady progress towards becoming debt-free.
- Negotiate a lower interest rate
If you have good credit, you may be able to negotiate a lower interest rate on your debts. Call your lender and ask if they can lower your interest rate or if they have any special programs to help you pay off your debt. If you have multiple debts with high interest rates, you may be able to negotiate a lower rate on all of them by consolidating them into a single loan.
- Get a side hustle
Consider getting a side hustle to increase your income. This extra money can be used to make extra debt payments and help you get out of debt faster. Whether it’s offering a service, selling a product, or taking on a part-time job, a side hustle can provide you with the extra money you need to get ahead financially. Just be sure to balance your side hustle with your regular job and other responsibilities, so that you don’t become overburdened and stressed. With a little bit of hard work and determination, a side hustle can help you achieve your financial goals and live the life you want.
Paying off debt can be a challenging but achievable goal. Remember that paying off debt is a process and it may take time, but with dedication and persistence, you can reach your goal of becoming debt-free. So, take the first step today and start working towards a debt-free life and a more secure financial future with the LOOP Wealth Management features today.