By Mark Richards from Fairway Independent Mortgage in Ridgewood, NJ.
Whether it is because of student loans, credit cards or car payments, holding on to a large amount of debt may prevent you from obtaining financing for a new home, car or other large purchase. More than likely, you are also paying interest on this debt, which is costing you even more. Make a resolution this year to pay down your debts.
Follow these simple tips to get started:
Prioritize by interest rate – Sort your debt by interest rate, and tackle the debt that has the highest interest rate first. This is the debt that is costing you the most money to keep so it will be the most beneficial to rid yourself of first.
Pay more than the minimum – To make significant progress on your debt, you will need to pay more than the required monthly payment. These required monthly payments are typically only 2 – 3 percent of the outstanding balance and therefore do not have much impact on decreasing your total debt. Set your focuses on first paying over the minimum each month on the debt that has the highest interest rate. Then, once that is paid off, increase your payment amounts on your other debts until those are also paid off.
Debt consolidation – Look into balance transfers from your high interest rate credit cards to a card with a lower interest rate. While this may sometimes come with a small transfer fee, the fee may be less than the interest you are currently paying.
Consider taking a break from credit cards – The best way to stop accumulating debt is to stop using your credit cards. If you have a significant amount of debt, putting your credit cards away may be a good idea until you have your finances under better control.
Use bonuses wisely – If you receive a bonus from work, use that money towards current debts rather than another purchase.
Reprioritize your budget – Set aside the necessary funds for monthly spending such as housing, food and transportation. Next, look for areas where you can cut back spending and use those funds towards your debt instead.
I would love to help you by further discussing your financial situation and give you some more tips on how you can pay down debt to prepare for your financial future. Call me today to setup an appointment!