Tips For Getting Your Large Debts Under Control
If your debts are getting too big to handle, there are steps you can take to cut your balances more quickly than you might think.
If you're like millions of Americans, you struggle to keep up with all your debts, whether they're for credit cards, student loans, your mortgage, auto financing or anything else.
But it doesn't have to be that way: There are simple steps you can take to bring down those high balances, which can have a serious impact on your long-term finances. The following are just a few of the changes you can make to your current repayment methods to cut your balances more quickly.
A word of caution on all these options before we begin, however: Make sure you're keeping up with all payments to avoid late fees and dings to your credit score, and also try to stop accumulating more debt throughout this process.
Make more than just the minimum payment
This may seem like an obvious one, but you might be underrating the impact the strategy can have. The Simple Dollar recommends that you pay more than the listed minimum on your bills if you have any cash to spare. Every penny you spend above and beyond that amount legally has to be counted toward your principal balance, rather than any interest you've accrued. As such, your debt will grow more slowly in the future.
If you take these steps to cut your debts, they'll shrink more quickly than ever before.
Target the smallest balances first
When you have a number of different debts spread across numerous accounts, it can be a good idea to pay off the smallest first while keeping up with minimum payments elsewhere, DaveRamsey.com advises.
Some call this the "snowball" method. Why? If you can stop paying $50 or $100 into that smallest account each month, you can use that money to start slashing the next-highest balance more quickly, and on up the ladder until you are dealing with only one large balance. It's all about building momentum.
Pay down the balances with the highest interest rates
On the other hand, you might want to deal with the accounts that have the highest rates first , since they will cost you the most money in the long run, according to The Balance. Here, too, making more than the minimum payment is a great idea, because if you're cutting into those high-interest balances just a little bit more than usual, you're saving slightly more down the road as well.
Think about debt consolidation
Finally, you might want to consider whether a debt consolidation loan will make sense for you. With such an option, you receive a large sum of money from a lender equal to your outstanding balances on other accounts, bringing them under one financial umbrella — also convenient in terms of not having to pay multiple bills each month — at a relatively low interest rate.
To learn more about your paths toward a more debt-free future, contact one of the local representatives at Vectra Bank. We can walk you through the options available to you and help you make an informed decision.
The information contained herein may not represent the views and opinions of Vectra Bank a division of Zions Bancorporation, N.A. It is presented for general informational purposes only and does not constitute tax, legal or business advice.