Late payment penalties, high interest rates, and over the limit fees make it feel like it’s just impossible for borrowers to climb out of debt. It is very tempting just to let that phone ring or to let the collection notices lay there unopened, but hiding your head in the sand and not addressing your debt problem won’t make it disappear. Quite the opposite, it usually makes it grow. These four tips can help you to pay your debt down quickly:
Sometimes you might get your income tax refund and want to use it for paying off your debt. You might want to think about adjusting your withholding in order to be paying in no more than you need to. The money collected by the government over and above what is owed doesn’t earn any interest the whole year through, and this is in spite of the fact that the money paid back gets repaid at very huge interest rates. Borrowers find they have more for repaying debts and less to borrow just from adjusting their withholding a little.
People who are experiencing problems paying back their debt have to be honest and up-front with lenders about the problems. Many lender are compassionate and have policies in place to help out by letting customers lower their interest rates. They can also refund late payment fees or penalties. If you address the problem straight up things can sometimes resolve themselves. Don’t treat your lender like the mob until they act like it.
Always pay more than your minimum amount due. Minimum payments on your credit cards are designed so borrowers will need years to pay them off, and while they do the credit card companies rake in thousands in interest. They charge ridiculous rates, sometimes as much as 30% APR.
A lot of people have some kind of savings, either a 401K or some other type of funds, from which they can draw on to help repay loans. While some people are totally against ever touching their savings, there actually is a bit of logic involved in cashing savings in. Cashing in savings accounts carrying low return rates to pay off debts accruing really high interest rates can be good. The rate of interest being accrued will far outrun the rate that the savings account will grow, even if you take into consideration that new deposits are being added to your savings account.