5 ways to pay off debt faster
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With the average household debt standing at a record £15,400, it's normal to have some sort of debt in your life. From consumer loans to your mortgage, it's a huge part of our modern culture. It's not just the UK, personal or household debt is a global phenomenon. While debt can help us fast track our plans or make big purchases, it can also be dangerous if we don't manage it carefully. Get ahead of your debt with our 5 ways to pay off debt faster:
1. What debt resources are out there?
People don't really talk about their debt, which is strange considering how many people have it in some form! It might feel hard to drop into conversation, but if you're struggling to pay off your debts, don't forget to see what resources you might find amongst your friends and family. Taking advice from people around you might help you find a new way to get on track or even help you feel less alone.
There are usually some free services that can help you access debt advisors and other experts. Professionals in these organisations will work in a non-judgemental way to help you make informed decisions about how to manage your debt. These professionals can even act as a middle man between you and your creditors to help you come to an agreement if you're struggling to manage your debt. Don't forget though, that if you are struggling, it's always helpful if you can approach your lender directly and discuss your options with them. It's in their interest to get their money back and they will usually be open to working with you to find a solution that's manageable.
2. Prioritise your debts
If you find yourself with several different creditors, then it's important to decide which ones are most important to pay off first. You may want to consider debts that could have legal repercussions or could risk your home are the most important to address. The Money Advice Service lists priority debts such as; court summons, electrical or heating when they are under threat of being turned off, possible bankruptcy and home and mortgage bills. After these are settled or you have a payment plan ongoing, then other bills such as loans to family or friends, overdrafts and other loans would be next in line.
Debt consolidation is another way to streamline your payments. Essentially, this is taking a lump loan that can include multiple smaller loans. The benefits of this are easier payments (no need to do the same amount of maths each month) and potentially a lower interest rate, helping you pay off faster and easier.
If you're tackling several credit cards at the same time, a good approach is to target the one with the highest interest rate and focus on reducing this balance first (obviously you should make at least the minimum repayments on any others as well) then when you've reduced the balance on the highest interest rate card, you can move to the next highest and start making overpayments to reduce the balance until all your cards are paid off.
3. Track your expenses
It sounds obvious, but it can be quite eye-opening actually tracking your income and expenditure and can help identify problem spending that's stopping you addressing debt more quickly.
So taking stock of how your money is being allocated can be the key to paying off debt faster. Keeping a notepad or spreadsheet for your expenditure can be a good approach, but requires self-discipline, as you really need to track every penny. Those lunchtime meal deals and coffees can really add up!
There are many expense tracker apps available with various features to help you keep tabs on your spending. Also, many banks offer integrated services where you can track each transaction easily. It's really important to not forget about your cash transactions, most of us spend the coins in our wallet without giving it a second thought. Note down cash transactions as you make them if you think this is where you're overspending.
4. Shop for bargains - but avoid sales tricks!
When you don't have lots of spare cash, people can feel drawn to getting a bargain. But many purchases made in sales where unnecessary to begin with, and you've fallen foul or clever sales tricks! Look at it this way, you're not saving money if it is an extra purchase - no matter how good the deal is!
When doing your food shopping, take a list - and stick to it! It's fine to take advantage of offers that are on products you actually wanted or buy regularly, but try to avoid buying things you don't need just because they're on offer. Online shopping can be a good way to avoid temptation, and you save time by not having to go shopping yourself! Don't be afraid to choose generic products over branded, as often there is little difference in quality. The small savings you make in your everyday spending can be directed towards paying off debts faster.
5. Save money on socialising
It's easy to get carried away when you're out with friends and family and therefore we often underestimate how much social activities will cost until it comes to paying!
But when you're trying to pay off debts and get your finances in order, every little helps. Choose cheaper options for socialising, such as cooking dinner at home or 'bring a bottle' type gatherings in your garden. If you feel like you're at risk of overspending, then maybe sit out on some occasions and save your spending for special occasions. You'll likely find it's more enjoyable if you know you can afford to spend on an evening out anyway!
Another way to stay in control is to set a budget. Set your limit to spend and maybe even leave your cards at home and take cash so you know you won't overspend.
Getting serious about paying off debt means choosing essentials over extras. After prioritising how to pay off your debt, be firm in your decisions to save money so you can get on track with manageable expenses.
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|Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk. Representative example: APR 1270% if borrowing £400 for 4 months. Interest rate: 292% p.a. (fixed). Total amount repayable: £665.48 by four instalments of £166.37. Maximum representative APR: 1604% if full loan repaid after 7 days.|