Updated: Mar 16, 2021
Do you have some spending regret? You promised to stick to a budget; you promised to scale down and have an old-school, back-to-basics, holiday. But some items were just too hard to resist.
After every holiday, many consumers reach their debt limit. And February is when there is a rise in bankruptcy filings and consumer proposals.
What can you do?
Here are a few tips to help get rid of that extra debt quickly.
Create a budget
Know where you’re at financially and start wherever you are. If you’re unsure of where to start, try a budgeting app. Once you know what you earn and what you spend each month -- it helps to see those numbers written out and itemized -- any monies leftover can be used to pay off debt. See what bills have high-interest rates, and pay those off first.
Change spending habits in the short-term
Put away the credit cards. Pay at least the minimum amount owed to avoid extra fees, but if you can, pay extra to get that debt down faster. Look at your other expenses and see where you can trim. You can review your grocery budget; cancel subscriptions and/or put memberships on hold.
Find, or negotiate a lower interest rate
Credit card interest rates can be notoriously high. Sometimes, if your payments have been current, creditors may be willing to reduce the rate if you simply ask. Your card company wants to keep your business, after all, and now is when competitors unleash their most attractive balance-transfer campaigns.
Get a game plan to pay off multiple cards/debts
If you’re still stuck with high-interest cards, list them in order of rates, highest to lowest. A reasonable approach is to attack the highest-interest cards first (making sure you pay the minimum on the other cards) and work your way down.
This doesn’t actually reduce debt but it can make monthly payments easier and if the loan has a lower interest rate than a credit card, then you’ll save dollars in the long run. If you own a home, consider speaking with a mortgage professional for a way to consolidate debt.
Refinance Your Mortgage
Mortgage rates are lower than consolidation loans and the increase can be amortized over the life of the mortgage. If you think refinancing may work for you, contact your mortgage professional and review all your current debts.
Use your holiday bonus
If you got one, consider using it toward paying off debt rather than spending it on a vacation or other luxury purchases. I know, you worked hard to get it, but you’ll be less stressed in the long run.
Life insurance loan
If you’ve been paying into a life insurance policy that has built up a cash value, check to see how much is available to you. You won’t be canceling your policy but companies may let you borrow the cash that’s been accumulated.
If you want to learn more, check out my Youtube video on How to Get Rid of Extra Debt Quickly!
We have a solution to help get rid of that extra debt quickly. Contact Arise Mortgage and let's see how we can help!