If you have a lot of debt, you might wish that you could pay them all off. This can be pretty tricky, especially when costs of living are rising, but this does not mean that it will be impossible. There are some different things that you can do, which should help you to pay them off successfully and, in some cases, quicker than required.
Ensure You Can Make Repayments
To start with you need to make sure that you are paying everything required for your loans. This means that you are making the minimum payments on your credit and store cards and that you are repaying your monthly loan payments etc. Check out what money you owe and what repayments you should be making and ensure that you are doing this. If you are, then you can start to think of ways to overpay some loans so that you can reduce your debt. If you are not, then you need to start with finding ways to make those minimum payments first and then hopefully you will be able to move on to overpaying. But how do you decide which to overpay?
Overpay Dearest or Smallest Debt
It is wise to check the terms of the different loans and cards that you have. For some you might have a charge if you overpay or repay it early. It could just be a small administration fee and this could be so small compared to the interest that you will save by repaying early, that it is worth paying. However, for some you may have to pay the equivalent of the interest you would have paid and a fee and in this case, it is unlikely to be worth repaying early. It is good to check and decide whether you think it is worth it.
If you have several debts, then you also need to decide which to repay first. It could be that you have a small debt and you would like to clear that so you get the satisfaction of knowing it is gone and then move to the next smallest. This is the most rewarding way to repay, however it is not the cheapest. It is better to repay your most expensive debt first. This is not the one where you owe the most but the one that has the largest fees and interest. It is likely that a mortgage might be your cheapest debt and a credit card the dearest, but you will need to check this for yourself.
Find Ways to Have More Money
To start paying more money off your debts, you will need to think about ways to get more money. It might seem almost impossible, but there are lots of options that we can consider and therefore there may be things that you have not thought about, that you can try out. It is good to try as much as you can and to think hard about what to do, so that you can do everything you can to repay. It will take initial effort, but once you get into the habit of it, it can be really easy.
There are two methods that you can use to get more money and they are to spend less and to earn more. You may find that one is easier for you than the other or that you can try both. There are lots of different things that you can try in each category and it can be good to think about what you can do. You may have tried a lot of things, but there may still be some ideas that could help you. There are some examples below to get you started, although they are not exhaustive and so you may want to think of some of your own as well.
Ways to Spend Less
- Compare prices on everything you buy from your mortgage to your bananas and make sure that you are not paying more than necessary.
- Consider value for money when you are buying items. For example, buy clothing that will last which may cost more, but you will not have to buy it more often.
- Consider whether items you are buying are luxury items or necessary items. If it is a luxury, then think about whether the money might be better spent being put towards paying off a debt. You may need to treat yourself at times, but do keep your debt free goal in mind.
- Save money when you first get paid. Put some of the money that you have received straight into a savings account. This means that you will not be tempted to spend it. If you keep it there, you will be able to access it if you want to but it will be harder to spend. Use an instant access savings account and that means that you will be able to get the money if you need it.
Ways to Earn More
- If you have a job already then it might be possible for you to ask for more hours, a pay rise or even apply for a promotion. It is worth considering this because it could be easier and more lucrative than other options.
- Starting a business is often seen as a way to earn a lot of money. There are some people that do extremely well in doing this, but this is not the case for everyone. It is worth remembering that you have to work extremely hard to set up a business and you may have to invest money as well and this means that if it does not do well, you could end up paying out more money than you make.
- Selling things you own could generate some lump sums of money. It can be good, if you want to get rid of a few things, but it will not provide you with an income. When you sell things second hand, you will not get back what you paid for them. So, you should only do it if you are sure, you will not need the items as if you have to buy replacements then this will end up costing you more.
- Downsizing could be an option to cut costs in lots of areas. You will be able to reduce your rent or mortgage in most cases and it should cost less to heat and maintain your property so you will save money.