Is debt weighing you down? You’re not alone as many households may struggle with loan payments, credit cards and other types of debt. Reducing your debt may seem like a pipe dream but it’s actually possible with planning and smart financial choices. If you want to take control of your money, then follow these 5 tricks to consolidating your debt.
Make a Budget That You Can Stick To, Then List Your Debts
The first step in debt consolidation is to make a budget that’s realistic. You need to know how much money you’re bringing in and how much is being taken out for expenses. Once you’ve outlined all of your sources of income, loan payments, and other debts, then you can decide how to approach your debts. You should make a list of every single debt, no matter how small, and the required minimum payment, as well as the attached interest for each. Go through the budget to see what you can cut: Cable? A landline you no longer use?
Get a Balance Transfer
When you consolidate your debt that means that you’re combining it into one payment. One of the best options for this to make a balance transfer if you just have credit card debt. You will first want to find a suitable credit card that offers 0% on balance transfers for a certain period or a reduced APR on a transfer. When you transfer the balance from your other cards to the new card, you’ll be paying less interest than if you continued to do individually on each card. Depending on your credit and the amount of your balance transfer, you may be able to pay way less in interest. Balance transfer interest rates vary according to cards, so be sure you’re aware of the terms.
Pay Down with a Debt Snowball
Have you heard of the debt snowball? Now that you have a list of your debts, it’s time to tackle them, especially if they haven’t been consolidated. A debt snowball involves paying off your smallest debt as quickly as possible. You will make the minimum payments on all other debts except for your smallest debt — that debt will receive as much as possible on it. Pay off the smallest debt, then move on to the now-smallest debt, and so on. Even an extra $10 from canceling a weekly paper delivery can make a difference when you continually try to pay down the small debts.
Take Out a Personal Loan to Pay Off Debt
If you don’t want to consolidate debt with a service or are unable to get a balance transfer, consider taking out a personal loan. You can use the personal loan to pay the debt off and then repay the loan. You may even find that you get a lower fee than if you did a balance transfer or kept paying on your credit cards one-by-one. A personal loan is also a good way to turn your debt into one manageable lump payment, and you can shop around for lenders.
Get Crafty with Savings and Interest
Even if you have just a little extra cash, it can help you save in the long run when you’re smart about paying interest. First, start collecting your loose change in a jar, and cash it out when you reach $20. Do that just 10 times and you’ve got $200! Imagine what a difference that “extra” cash could make. For instance, if you have an item that you owe $5,000 on, and you use your extra to make extra payments, you’ll be paying less in the long run, since you’ll be paying more towards your principal, thereby reducing your the amount of time you’ll have interest. You could also make biweekly payments on the loan amount and have less interest applied, because you’re making payments twice. The final option is to round up your payment options, such as paying your $560 mortgage as $600. The extra $40 you pay might not seem like much, but do it every month, and you’ll keep paying an extra $80 every two months on your loan — that’s an extra $480 towards your principal every year!
There’s plenty of ways to save money, but you have to get out there and find them. We hope these tips help you save on your debt, big or small.