Do you have debt? Join the millions of other Americans that do as well. Credit cards, auto loans, and student loans are just a few of the many ways in which to accumulate debt. However, owing money isn’t always a bad thing. One of the best ways to boost your credit score is to establish a credit history by taking out debt and then paying it back. But what happens when things get out of hand? How do you keep from drowning in your payback obligations? Good debt management is key and below are several of our recommendations to best handle your money and stay out of the red.
Debt Management 101: Organize Your Bills
It may seem like a no-brainer to take account of what you owe. But surprisingly, many people fall victim to lack of proper organization and lose track of their payments. And missed payments are a huge no-no. So, write down a list of who you owe, how much debt you have for each, the payment amount, and when your payment is due. This allows you to 1) plan your budget to ensure you pay all your bills on time and 2) figure out which debt accounts to pay off first.
Pay Off High-Interest Rate Accounts First
And speaking of paying off accounts, the best debt to get rid of would be whichever has the highest interest rate. That’s because that interest is adding exponentially to your debt. The longer you take to pay it off, the more you’ll end up paying. Another option to try? Pay off your lowest balances first. Get rid of the number of debt accounts you have in order to improve your credit score. Neither is a bad approach when it comes to good debt management.
Lower Your Interest Rate: You Never Know Until You Ask
In some cases, you can actually lower your credit card interest rate simply by asking! Lenders would rather lower your interest than risk you defaulting on your debt. Typically, your best chances of success are with cards you’ve had for a year or longer. And you want to have a good payment history with your credit card company as well. But in quite a few scenarios, you may be able to knock off some of that high interest!
Don’t Just Stick To The Minimum Payments
If you’re at all able, try to pay more than just the minimum monthly payment. Again, the longer you take to pay off your debt, the more you’ll be paying due to that pesky interest. As a rule of thumb, once you pay off one account, you can use that money you would have put towards that account and roll it into your other debt payments. For example, let’s say you just paid off your car. Take that $500 monthly car payment you no longer have and put that money towards your credit card debt each month. Before you know it, you’ll be debt free!
And if you feel you’re ready to take on the responsibility of an auto loan, be sure to visit us online and get started with our financial partners to explore your options!