Financial Wellness: Crushing Debt
Being in debt doesn't have to be a way of life. Through dedicated action and commitment, reaching true financial wellness and being financially independent is possible.
Here are five steps to help you effectively reduce or eliminate debt:
Organize your debt
Begin by assessing the total debt you need to pay off. List all your credit cards and loans with their outstanding balances and the interest rate associated with each. Remember, outstanding balance is the total amount you currently owe on a credit card or loan, including interest or fees. These numbers will be crucial for developing your debt repayment plan. Lastly, add the amounts owed on each account to determine your total outstanding debt.
Choose your debt-crushing method
Once you have all your card and loan amounts, there are two methods to begin paying off your debt.
The snowball method involves paying off your smallest debt first and then moving to the next smallest debt until all debts have been paid off.
The avalanche method involves getting rid of the debt that has the highest interest rate first and moving on to the debt with the next highest rate until all debts are paid off.
Each method has its advantages and disadvantages. The snowball method offers frequent motivation by quickly paying off debts, but it may result in paying more interest. On the other hand, the avalanche method usually saves more on interest, but it may take longer to see results. Choose the method that makes the most sense for your personal and financial situation.
Maximize your payments
After you've selected your debt-reduction strategy, focus on increasing your monthly credit card payments. You can accomplish this by reducing expenses in a few areas of your budget and allocating those savings toward debt repayment. For instance, cut down costs on dining out. If you spend about $200 a month at restaurants, aim to reduce it by half by cooking at home instead.
Negotiate with your creditors
Many credit card companies may lower your interest rate if you show commitment to paying down debt. Once you start your payment plan, consider contacting each credit card company to explore your options. Even if one or two agree, you’ve made progress toward lowering your rate.
Consider a debt consolidation loan
If the credit card companies won’t lower your rate, consider a debt consolidation loan. For many, the hardest part of paying off debt is handling multiple payments across different credit card accounts. With several monthly payments, it's easy to lose track. Often, it can feel like you're only paying off interest and not making progress on paying down overall debt.
A debt consolidation loan can simplify this. By consolidating debts into one low-interest loan, monthly payments become easier to manage. Instead of making multiple payments to a series of loans and credit cards, you’re making one payment with a fixed end date to pay off the total balance. Plus, you can potentially save on interest, especially if the loan has a lower average rate.
Regardless of the strategy or methods you choose to pay off your debt, ensure you avoid adding new charges to your card during the process. Eliminating significant debt demands time and determination, but achieving a debt-free life is key for maintaining good financial health.
If you're interested in a debt consolidation loan, call us at (888) 858-6878 to speak with a loan representative. Free financial counseling is also available to our members. For more details, visit our website or call (888) 456-2227 to speak to a financial counselor and get a personalized plan to pay off your debt.
Good luck!