There are few things better for your financial health than paying off any debts that you have as quickly as possible. The fact is, the longer you have the debt and the longer interest accrues, the more you pay for that debt. Even if what you purchased might have been a “bargain”, paying for it over several years will quickly turn it into something far less. For that reason, we put together a number of tips and bits of advice for paying off your debt smarter and faster. Enjoy.
Tip 1: Prioritize
The larger a single debt that you have happens to be, the more interest you’re going to pay on it. Also, interest rates differ from one debt to another. Your best strategy is to pay the biggest, highest interest debt first, even if it means just paying the minimum payments on some of your other debts while you do. If you have to take a few minutes and “do the math” to see which card will be best to pay off first, the time you spend doing it might save you quite a bit of money.
Tip 2: Keep Track
There are some financial experts that will tell you to treat paying off like going on a diet. Both require a good bit of discipline but, along the way, it’s okay to treat yourself if you’re reaching goals and making targets.
Making a “to do list” and tracking your income and expenses is very similar to dieting and getting back in shape. Once you can cross something off of your to do list, treat yourself to something small but nice. For example, if you pay off a $500 debt, treat yourself to a nice meal at your favorite restaurant.
Also, make sure that you don’t bite off more than you can chew, pun intended, with your debt payment goals. This can sometimes cause people to give up (just like they do with diets) which obviously won’t help your finances in the least. For example, some people start a diet by saying “I’m going to stop eating carbohydrates completely”. Of course that’s a bit unrealistic and, in time, they realize that it can’t be done and end up going back to their old habits.
Tip 3: Never (and we mean never) miss a Payment
Right now you might be overwhelmed by your credit problems but, if you haven’t missed any of your payments, do whatever it takes to not miss any in the future. Not only will you avoid late payment fees but you will stay in the good graces of your credit companies, who will realize that you’re doing your best to pay down your debt. Once you start missing payments, their affinity for you will quickly go out the window. The fact is, a bank (for example) would rather get something from you as a payment rather than nothing. The same goes for auto loans, credit cards and so forth.
Tip 4: Don’t confuse debt settlement companies with debt management companies
If there’s one type of business that is complained about more than any other to the Better Business Bureau its debt settlement companies. The advice that they give, and the penalties that many of their customers are forced to pay because of that advice, means that there isn’t a whole lot of love out there for these types of companies. That being said, debt management companies, usually nonprofit organizations that belong to the National Foundation for Credit Counseling, might be rather helpful. Confusing the two however could be very costly.
One thing to keep in mind with debt management companies however is that, when you enter into one of their plans, it’s likely that this will be reported to credit agencies and your credit score might suffer. On the other hand, if you make payments on time through any program you set up with a debt management company, you can slowly but surely rebuild your credit score and go even higher than you were before.
And there you have it. 4 excellent Tips for paying off your debt smarter and faster. Hopefully these will help you to do just that and, in time, pay your debt down completely and get your credit score back up to a point where it begins to help you again with new (and hopefully smarter) credit in the future.