Getting out of debt can feel like an insurmountable challenge but rest assured, it doesn’t have to be. If you find yourself in debt, here are 7 strategies that can help you pay off what you owe and gain control over your finances.
1. Figure out what you owe
The first thing to do when trying to get out of debt is make a list of all your debts/creditors and how much you owe to each. Not only will this help you put together a plan for paying down your debt, but it will also help you organize everything in one place for a complete and clear picture of where you stand financially.
2. Start with your most expensive debt
When it comes to prioritizing what debt to pay off first, the loan with the highest interest rate is a recommended place to start. However, the largest loan you have is typically the loan you pay the most interest on. Therefore, make your selection on which loan to pay down with added attention to identifying which loan will eliminate the biggest payment.
Then, when you’ve completely paid off that first loan, continue paying down debts with the next highest loan (or interest rate) in line. For many, it’s a great place to start when managing your plan for getting free of looming loans and debt.
3. Pay more than the minimum payment
It can be tempting to splurge anytime you have extra money at the end of the month, but putting it toward your debt is one of the best ways to help pay down what you owe. It’s also a great way to save on the amount of interest you’ll pay over the life of the loan. The key is to simply pay more than the minimum required payment consistently so you can eliminate the debt faster.
However, before you get too ambitious, check the terms of your loan(s) to determine whether additional fees or prepayment penalties apply.
4. Make extra loan payments
Much like paying more than the minimum on a loan, making payments more than once a month is a great way to make headway more quickly on eliminating debt. Some lenders will even allow you to make extra payments specifically toward the principal of the loan.
In the case of credit card bills, paying more than once per month can make it easier to track how much you owe, as well as lower your balance/utilization ratio (the percentage of your total available credit being used). And lowering your utilization ratio can have a positive effect on your credit score.
5. Refinance and shorten your loan length
Where possible, refinancing your loan to a shorter term can help you to pay it off faster, as well as save on the total cost of borrowing. In many cases, you may even be able to qualify for a lower interest rate, depending on your situation. Keep in mind, shortening the term on a loan could increase the monthly amount due on payments.
6. Consolidate your debt
Debt consolidation allows you to combine several debts into one new loan. This can be especially helpful when dealing with high interest debts. By combining all these high-interest debts into one loan, not only will you only have one monthly payment to worry about, but ideally a lower interest rate as well. Zions Bank has a debt consolidation calculator to help find out if debt consolidation is right for you.
7. Seek additional ways to save money
In most cases, paying off debt faster requires making more payments or making more than the minimum payment each month. In either case, it may require finding a little extra cash and will power. Consider looking for ways to save some extra money to put toward the debt by giving up that daily latte habit or cancelling a couple subscriptions. Even an extra $20 a week can put a sizable dent in your debt over time.
Zions Bank is here for you — no matter where the road takes you.
When it comes to helping you get out of debt and on the road to financial independence, Zions Bank is here for you with numerous financial tools and services at your disposal. Our experienced bankers are ready to answer any questions or support you in any way you need, by phone, online or in person. Visit a local Zions Bank branch to speak with a banker and learn how to reduce your debt today.
