Debt can cause chaos, not only on your family finances but also on your ability to borrow. Having a load of debt can create stress be hard to get under control. There is hope. The good news is, is that there are ways you can aggressively pay down your debt, helping you to get in a better financial position quicker and alleviate the stress that debt can bring to your family.
"The rich rules over the poor, and the borrower is the slave of the lender." Proverbs 22:7 ESV
1. Always Pay More Than the Minimum
Not only will paying the minimum only cost you a significant amount in terms of interest, but it will also typically take ten years or longer to repay the debt even without additional charges. Look at your budget and find areas you can cut that can allow you to pay at least double the minimum each month.
2. Consider the Avalanche Repayment Structure to Reduce Debt
Start with your highest interest rate card or loan and pay as much as you can each month while paying the monthly minimums on the rest. Once that first debt is paid, take the amount that you were paying on it each month and begin paying that in addition to the minimum payment on the next highest interest debt. Continue this method until each debt is paid off.
3. Snowball Down Your Debt
A snowball repayment plan is similar to the avalanche repayment except instead of targeting your highest interest rate debt first, you will start with debt with the lowest balance. This may be the best method if you have multiple cards with low balances as it will free up funds more quickly. It's also a good way to get an early "win" by crossing a debtor off your list.
4. Look at Balance Transfer Offers
You may receive credit card offers with a zero percent balance transfer interest rate if you repay the debt in a certain period. Consider these to transfer high-interest credit card debt. Without interest accruing, you may be able to pay the balance down much quicker. Be sure to read the fine print to ensure there's not a fee for the transfer you're overlooking.
5. Apply for a Home Equity Loan
If you have accrued a large amount of equity in your home, you can secure a home equity loan to pay off your debt. If you have a lot of equity and a fairly good credit score, you will be able to get a much better interest rate than most credit card interest rates. This is a more complicated solution than some others so reserve this tactic for situations with larger debts.
6. Look at a Debt Consolidation Loan
Debt consolidation loans are personal loans that are used to pay off high-interest rate credit cards. You will typically need good credit and a strong income for this option to result in significant savings. The other benefit of a consolidation loan is that it will be for a set term. This means if it is a three-year loan, you know at the end of three years you will be debt free.
7. Trim Your Budget to the Bare Minimum
Part of paying your debt down aggressively involves finding more money to put towards your debt. This means taking a hard look at your income and budget and finding areas where spending can be cut, and that money can be put towards paying down debt. Even if you are able to trim something for a few months, the extra cash can help you make some great progress toward paying down outstanding debt.
8. Raise Additional Income
If you have trimmed down your budget and realize you need more money coming in to put towards debt repayment, consider taking on a side gig to bring in some extra money used solely to put towards debt. This could also mean asking for more hours or opportunities at your current job.
9. Consider (With caution) Loans From Friends and Family
If you have family and friends that have the means to loan you money, you might want to consider borrowing money to pay down your debt. Odds are your family and friends will give you a more favorable interest rate, but always make sure to honor your repayment so the relationship can stay strong. Money and relationships do not always mix well. If you do get a loan from someone close to you, make every effort to put the terms in writing and structure the agreement in a way that will preserve the relationship.
10. Try to Renegotiate With Your Creditors
When you are way in over your head with debt, it may be time to talk to your creditors to see if they would be open to renegotiating the terms of your debt. Sometimes creditors will offer settlement amounts to save you on fees and interest, but this can have a negative effect on your credit, so it should be done with caution.
“Creditors have better memories than debtors.”
When following the tips above to aggressively pay down your debt, it is also critical to take the time to identify what caused the debt in the first place. You will need to get a plan to make sure that once you have paid your debt down, you prevent your household from getting into that situation again. This can include cutting back on spending or setting up emergency funds. Remember one of the most essential parts of paying off debt is putting systems in place to ensure it won't happen again.
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