Useful tips on how to get out of debt sooner
Whether it’s due to a car loan or a stack of credit cards, getting into debt is something that’s easy to do. However once in it, debt can seem impossible to get out of.
What’s more, with the reduction of JobKeeper and JobSeeker benefits from the end of September, staying on top of those finances can seem even more daunting. However, all is not lost when the bills start to climb.
No one single method suits everyone as we all have different approaches when it comes to money, but thankfully there is a host of options to take debt head on. Let’s take a look at some of the tips to paying off debt.
1. Create a budget – save and pay off the debt
Let’s start simple. You don’t need an accountant or expert to figure out a weekly or monthly budget and get your spending plan on a roll.
Kick things off by noting down your income and then all your expenses – not just fixed expenses like rent or mortgage repayments and groceries, but also those pesky expenses that adds up each week. From there, see how you can stop wasting money and put that saving towards repaying those debts.
A budget doesn’t have to stay fixed either – make sure you review and adjust it as needed.
2. Adapt to the changing situation
With the COVID-19 pandemic still affecting many individuals around the country, you can negotiate with your lender or creditor if needed. Let them know how you have been affected by the pandemic and if you are receiving the JobSeeker payment or JobKeeper payment for starters. These payments changed from September 28th and will change once again on January 4, 2021.
Aim to make the highest repayments on those high priority debts, but you can defer or make lower payments on low priority debts if needed. Remember to only agree to repayments you can afford and see if you can negotiate when to make those repayments. You can even ask if you’re eligible for assistance whether that’s by a discount or even a government rebate.
3. Get a second or seasonal job
It may be tough to come by, especially when many have lost employment due to COVID-19, but a side hustle is another way to earn some extra cash.
The important thing to remember is to dedicate all your earnings from this job towards repaying off your debt. It’ll save a whole lot of hassle in the long run.
4. The Debt Avalanche Method
When it comes to actually making those debt repayments, there are two tactics that you may have heard of. The first may sound daunting, but the Avalanche Method of getting rid of debt involves paying off the highest interest rate loan first. This tactic means you make minimum monthly payments on all your lower interest debts and pay extra towards the debt with the highest interest rate until it’s gone. Not only does it make sense mathematically, but using the Avalanche Method also means you’ll pay less in interest and can pay off your debts quicker.
5. The Debt Snowball Method
Similar to the Avalanche Method, the Snowball Method involves making minimum payments on all debt but instead you pay off the smallest debts first to get them out of the way before tackling the bigger ones. This method sees instant progress and is great for building momentum – they do say slow and steady wins the race and if you stay on track, it can have big results.
6. Debt management plan
For those with non-priority debts like credit card and personal loans, a debt management plan (DMP) may be a solution.
A DMP is a plan arranged between debtors and creditors that replaces previous debt commitments with a new, more affordable structure that better suits your current circumstances. With a DMP, you’ll have a new repayment schedule plus a new relationship with your creditors and it can be a huge relief to start afresh.
7. Pay off credit card debt with a loan
When it comes to credit cards, the top three tips are to pay on time, pay as much as you can each month and cut back on the number of credit cards that you have. Interest rates on some credit cards can be high. An option to tackle multiple credit card bills is to consolidate the debt into a single personal loan.
Online loans to boost cashflow
Sometimes we have the best intention to pay off our debt faster but life throws us a curveball and we need a helping hand to get through, even if only to the next pay cheque. Credit24 offers a flexible loan option of up to $10,000. Choose the repayment frequency and repayment length that matches your salary cycle, plus repay the loan early with no penalty. We even loan to part-time and casual workers. Find out more.