It’s no secret that many people across the country carry debt that interferes with daily life and long term plans. One of the most common reasons people put off taking a vacation, getting married, or starting a new business is due to lingering personal debt.
Nationwide, mortgage debt has grown up $10.5 trillion, and approximately 44 million student loan borrowers owe a total of $1.5 trillion. The worst part is that many are unknowingly overpaying on loan interest. For example, about 8 million Americans could qualify for lower student loan interest rates today. Let’s look at some real world ways to get your debt down to a manageable size.
Refinance Your Loans
Refinancing means swapping your current loan for another with more favorable terms. The end result can be a lower monthly loan payment, or you could end up paying off your loan faster. Far too many loans carry high interest rates that can easily be refinanced.
This process is incredibly easy now thanks to the Internet. For instance, a web based, multi-lender marketplace can save borrowers an average of $18,000 on student loan payments over the life of the loan. These online platforms show you prequalified rates with multiple lenders, and the process only takes a few minutes. The same strategy can be applied to mortgages and car loans as well.
Cut Back On Spending
Technically, this doesn’t directly reduce your debt, but it may have a huge impact. For example, if you don’t pay your credit card balance in full each month, any unpaid balance gets added to your overall debt. On the other hand, if you contribute savings towards paying off debt, the benefit is multiplied since you pay less on interest the next month.
Use these items to identify exactly where you spend your money:
- Credit card statements
- Bank statements
- Store receipts
Carefully review your records and find out where you can trim back spending. Then dedicate some, or all, of those savings to paying off your debt. Remember, getting high interest rate (credit card) debt paid off should be a priority.
Set Up A Smart Medical Payment Plan
Large medical expenses are a common cause of bankruptcy since many end up taking out high interest loans to pay the bills. If you owe money to a doctor’s office or hospital, it’s worth asking them for an interest free payment plan. If they say no, then attempt to negotiate a lower interest rate.
You might also look into a flexible spending arrangement or health savings account from your employer. The great thing about these plans is that they allow you to contribute tax free. Even better, some companies will be willing to make matching contributions.
You don’t have to live with crippling debt. If you take the right steps sooner than later, you might be surprised how quickly your debt burden disappears. In summary, try these strategies:
- Refinance – Exchange high interest rate loans for ones with better rates.
- Increase savings – Then use what you saved to get your debt down faster.
- Manage medical debt – Renegotiate current debt and consider employee savings accounts.