Paying down existing loans is no easy task. Many people feel like they are always paying off their debt and never getting anywhere, or at least moving very slowly. If you’re trying to get your finances in order, this can be discouraging. We understand that there are simply times in life when you will have a balance due and may only be able to pay the minimum or accrue a late charge. But this is an added stress to managingyour credit score.
The reality is that larger loans with higher interest rates will start to add up fast. If you have large debts, they are going to take a while to pay off no matter what you do unless you have a great debt-to-income ratio. Don’t panic. According to theUrban Institute, there are more than 64 million Americans with credit card debt. Additionally, there are over340 million Americans who are carrying some form of debt, big or small.
This article will show you how you can pay down all or most of your existing debt by cutting back on your budget and eliminating unnecessary expenses in less time than you think.
Steps to Consider When Paying Down Debt
Paying down existing debt on loans or credit cards is a great way to put your money to good use. It’s also the perfect way to take control of your finances. If you create a solid plan and stick to it, you are bound to see differences in your debt management journey.
Here are some steps you want to follow in order to pay down your existing debt:
Make a list of all your debts, including the amount you owe, the rate of interest, and the minimum payment.
Then, figure out which one has the highest interest rate (APR). This will help determine which loan or credit card should be paid off first.
Start by paying more than the minimum payment amount on the higher interest debts —but not more than 15% of what you earn per month in extra payments (after taxes).
After making these extra payments for several months, shift your focus toward paying off loans or credit cards with lower interest rates next (if there are any).
You should also make a list of the things you spend money on each month. This list will help you determine where you need to budget.
Set up a budget that includes how much money you can allocate toward paying down debt each month and make it a priority over other expenses such as entertainment or eating out. You may have to cut back on spending until your debt is paid off, but this is better than being stuck in debt for years on end with no end in sight.
Check your credit report regularly to look for errors that could affect your score and make sure it’s correct bydisputing any errors with the credit bureaus or creditors if necessary (you can do this online). Look for accounts that have been paid off or closed so they don’t show up on future reports as open or delinquent accounts. If there are accounts listed as unpaid when they shouldn’t be, contact the creditor or company responsible for reporting them accurately so they can fix the error immediately (it’s illegal for them not to!).
Here at Marine Credit Union, we aim to serve all the members of our community no matter their financial standing.Contact us today to talk to our financial counselors or gain more information on financial resources.