If you’re in debt, you’re not alone. In fact, the average American household has $90,460 in debt, according to a recent CNBC report. This debt includes credit cards, auto loans, mortgages, personal loans, and student loans.
While that number may seem daunting, there are things you can do to make paying down your debt feel more manageable and lessstressful. Here are 5 strategies you can incorporate into your financial habits that can help you start feeling the satisfaction that comes with reducing your debt efficiently:
1. Student Loan Refinancing
If you have private student loans, one of the best things you can do is refinance them. A great option for borrowers with high-interest rate private loans, student loan refinancing can potentially save you thousands of dollars in interest and help you pay off your debt faster. Plus, it can serve asa way to consolidate student loan debt from multiple lenders into one place and make your monthly payments more manageable.
Refinancing consolidates and replaces your current debt with a new loan. Ideally, this new loan offers a better interest rate and loan terms to reduce your monthly payments. While refinancing student loans is a great option for many borrowers, it’s important to compare rates and terms from multiple lenders before you choose a new loan. Be sure to understand all the terms and conditions of your new loan before you sign the dotted line.
2. Create a Debt Repayment Plan
If you’re not sure where to start when it comes to paying off your debt, creating a repayment plan can be a helpful first step. When you create a repayment plan, you’ll list out all your debts, along with their interest rates and minimum monthly payments. From there, you can prioritize which debts to pay off first and make a plan for how you’ll tackle them.
3. Snowball Your Debt Payments
The debt snowball method is a popular strategy for paying off debt. To use this method, you’ll list out your debts from smallest to largest and then make the minimum payment on all of your debts except for the smallest one.
Once the smallest debt is paid off, you’ll apply the money you were using to make that payment to the next smallest debt, and so on. The goal is to “snowball” your debt payments, so that you’re making larger and larger payments as you go.
4. Attack Your Highest-Interest Debt First
If you’re looking to save money on interest, attacking your highest-interest debt first is a good strategy. By paying off your highest-interest debt first, you’ll save money on interest over time and be able to pay off your debt more quickly.
5. Debt Consolidation
“Another great way to make paying down your debt more manageable is to consolidate your debts into one large payment,” says Benjamin Stenson of Norsemen. This can be done by taking out a personal loan or using a balance transfer credit card. Doing so can help you save money on interest and fees and can also help you streamline your monthly payments.
Whether you use one or several of the strategies mentioned above, keep in mind that paying off debt is a journey. It takes time, patience, and perseverance. But with focus,commitmentand some strategic planning, you can efficiently pay down debt and start feeling satisfaction in the process.