How to Improve your Credit: 3 Tips for Paying Down Debt
Posted by Eric Skates on
When you have debt, it can feel like you're dragging a chain around everywhere you go. Even when you're trying not to think about it, it's still there, weighing on you. While we'd all like to just set it aside, it can feel like an impossible task. Fortunately taking small steps today can have a big impact down the line, and if you're looking to pay down the debt that you owe, then you should consider some of the following tips...
Tip #1: Review Your Budget
We all have a budget, and while it's true that you can't budget your way out of debt, it can paint a picture that lets you see where you are right now. Sitting down with your finances and examining where your money is going allows you to see what your expenses are, and what disposable income you have per month. Once you know how much you have available, you can then decide what changes you need to make to your budget in order to start putting more effort into paying down your debts.
Tip #2: Focus on Smaller Debts First
Even a journey of a thousand miles begins with a single step, and if you have lots of debts then it's important to pay off the smaller ones first. This is good for your mental state, as it allows you to feel like you're making progress, but it also frees up more of your resources that you can use to start paying off your larger debts. While it might only be an extra $10 or $20 a month, that can add up when it comes to chipping away at the principal month after month. And every time you pay down another debt, you have even more muscle to push at the bigger ones with.
It works like a string of dominoes that get progressively bigger. The first one might seem inconsequential, barely giving you the force to knock down the next bigger one. But as you go, you build up momentum, and that can allow you to knock down truly impressive debts that seemed so immovable when the whole process began.
Tip #3: Debt Consolidation
If you've been dealing with debt, you've no doubt heard of debt consolidation. The way this works is that you go to a lender, and they pay off your existing debts. This gives you a single loan that you have to pay back, which consolidates all of the outstanding debts you have into a single payment on a single loan.
Before signing on the dotted line with this option, it's important to do the math, and examine how much you're going to be paying per month, and for the total life of the loan. Because while a debt consolidation loan might seem like a help, and it's entirely possible you'll save money over the lifetime of the loan, it's also possible that it's a more expensive option. Always check the fine print before going forward with this choice.
You Don't Have To Do It Alone
Paying off debt isn't easy by any stretch of the imagination. If it was, no one would ever have a problem doing it. If you're struggling when it comes to paying off your debt, though, we are there to help you. From strategies you may not have thought of, to options that can help reduce the pressure while still allowing you to make progress toward your goal, we can help you reach that debt-free future you've been working toward. And, when you're ready, we're also here to help you get a mortgage for that house you've always wanted.