Unlike trolls on the internet, debt doesn’t go away when you ignore it. If you’re struggling with debt, it’s important to look closely, so you can figure out what steps to take next.
Long-lost rich aunts aside, there’s no instant fix. But we’ve got a few tips to take control of your debt and pay it off sooner.
1. Find out where you stand.
Actually adding up what you owe can be pretty daunting. Take a deep breath and start with a list. Note down every debt you have – who you owe, how much, and the rate you’re paying. Using different coloured pens can help with stress levels.
The results may not be pretty but until you have a clear picture, it’s impossible to move forward.
2. Consider a debt consolidation loan.
When you consolidate debt, you fold several outstanding debts into one loan, ideally at a lower interest rate than what you’re paying now. That means you just have one repayment to make each month. With a lower rate, making the same repayments will actually clear your debt faster, and you’ll be able to see how much you owe at a glance.
If you’re a home owner, your mortgage can offer an ideal option to reduce debt, with the lowest interest rate of any option.
If you don’t have an existing mortgage, you may be able to roll all of your debts into a personal loan. Shop around for a low-rate loan with zero accounting keeping fees, which will help your available budget stretch further. A shorter loan term can also help you pay less interest over time.
3. Knuckle down.
Consolidating your debts is a great step towards financial freedom, but once you have a loan in place, you need to get serious about paying it off.
Don’t drag out stress or interest payments – eliminate it as quickly as possible. Pay off as much each month as your finances can handle. Pay extra, if you can – any additional payments will help you reach your debt-free goal sooner.
4. Speak to your creditors.
If the idea of speaking to the people or companies you owe sends you into a panic spiral, you’re not alone. But the truth is, paying off your debts is good for everyone. If your creditors can help you get on top of your money, it’s better for them, too.
A debt consolidation loan isn’t an option for everyone. Reach out. Get under a blanket first, if you need to. Many service providers and lenders have policies for financial hardship, but even if they don’t, you may be able to set up a payment plan, so you can bring down your debt without fearing their phone calls.
5. Learn how to stay out of debt in future.
Understand what made you get into debt into the first place. Whether it comes down to overspending, an unexpected bill, or a drop in your income, you need to take steps to be sure you don’t wind up on the debt merry-go-round again.
Living within a budget, building a pool of rainy day savings and properly managing your money are the keys to living debt-free. Learning more about how to achieve these things can be fun and free. Check ME Bank’s managing money online course, and start learning how to get out of debt – and stay there.
This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.