There are strategies to help you get back in control if you’ve found yourself falling behind or growing impatient with your debt payments.
- Debt Snowball Method: With this method, you start small and work your way up. Begin by paying off your smallest debt first. Then, take the amount you were paying for that debt and pay it toward the next smallest debt, and so on until everything is paid off.
- Debt Avalanche Method: Just like an avalanche, you knock out the big things first and then work your way down. Focus on paying off your highest interest rate first, then roll those funds into the next highest, and then the next.
- Debt Management Plan: This is a plan set up by a non-profit or credit counseling agency to help you pay off your debts. Your counselor negotiates and handles everything with your lenders, often helping you get a lower interest rate or waiving fees. Once it’s set up, you only need to make a single payment to the agency, they handle the rest.
- Debt Consolidation: Debt consolidation allows you to combine all of your debts into one payment by taking out a new loan, ideally with a lower interest rate, and using it to pay off your debts. Be careful though, sometimes you could end up being in debt longer because of the new loan and thus paying more interest overall.
Beyond the major strategies, there are other adjustments that you can make to your approach to debt and daily spending habits that can make a large impact.
- Reduce Expenses: The simplest thing you can do, if you act quickly, is stop spending on anything that isn't essential. Since debt doesn't go away by itself, the faster you stop adding to the problem the better. You might also consider how to reduce your expenses in the short-term, for example, by subletting your apartment or renting out a room in your home until you can get your debt under control.
- Pay More Than Your Minimum Balance: Adding even just a little bit of extra money to your monthly payment can help you pay off your debt sooner and pay less overall. Just how much of a difference can it make for you? Use the Debt Payoff Calculator to find out.
We understand that sometimes, life can get overwhelming. It’s scary to find yourself in a situation where you can’t afford your monthly debt payments. Whether that’s due to a sudden life change, like a job loss or illness, or if you’ve simply found yourself unable to keep up, there are steps you can take. If you are in a situation where you are unable to afford monthly payments, take action by clicking here to read a bonus article for today. By choosing to face the issue and develop a plan to correct it, you are making a giant step toward the better financial future you signed up for at the beginning of this month. Your future self will thank you!
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