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Originally Posted On: https://kingcash.ca/a-beginners-guide-to-paying-off-debt/
You grimace each time you look at your credit card balance. And unfortunately, it seems like a mountain you’ll never get over.
You’re not the only person who feels this way. Research shows that Canadians owe an average of $2 for each $1 they possess.
Unfortunately, paying off debt can feel stressful. Fortunately, you can begin to take steps to finally eradicate your debt.
Let’s jump in!
Pay Off Your Smallest Debts First
One of the best things you can do to start paying your loans is to tackle your minor debts before paying your bigger debts.
This “debt snowball” strategy is based on the idea that paying off small debts is much easier than taking on larger debts, like mortgages and student loans. When you follow this strategy, you might feel more motivated to stay the course on your journey to debt elimination.
Pay Off Your Costliest Debts First
Rather than snowballing your debt, you may want to use the “avalanche” strategy by focusing on your costliest debts first.
This strategy involves repaying a higher-interest-rate debt before you pay a lower-interest-rate one. You should still pay your minimum amount on the less expensive debt during this process. However, you should put any additional cash you have toward the costlier debt to get rid of it sooner.
For instance, let’s say you have a mortgage and an auto loan. Your mortgage rate may be lower than your auto rate. In this situation, try to pay extra on the auto loan before you put extra money toward your monthly mortgage payments.
Capitalize on Balance Transfers
Balance transfers may also help with paying debt, as they involve moving debts from certain accounts to new accounts, offering low introductory interest rates. Balance transfer opportunities are typically available through credit card companies.
Note that you may have a hard time qualifying for a balance transfer card if you have high amounts of debt. Still, if you are eligible for this type of card, it can help you to pay debt more quickly because you won’t be paying any interest for a given amount of time.
If possible, you should pay off your balance within the given time frame. Then, you can transfer the amount you were paying each month to your balance transfer card to the next debt you wish to tackle.
Sell Your Unwanted Household Items and Gifts
Another strategy for paying your loans is to sell items around the house that you no longer need. This can help you to generate extra cash that you can then use to pay down your debt.
The items you collect can easily be sold on websites like Craigslist or Facebook.
Consolidate Your Debt
You can also wipe out your debt by consolidating it using a personal loan. Through debt consolidation, you can combine all of your debts into one loan. Then, you make a single monthly payment.
Debt consolidation offers a couple of benefits. First, it streamlines your debt payment process, as you can focus on making just one payment versus several payments each month. Second, you may be able to consolidate your debt at a lower rate of interest and, in turn, make a smaller monthly payment.
An added bonus of using a debt consolidation loan is that these installment loans reflect positively on your credit report. As a result, taking out this type of loan may actually lead to a higher credit score.
Develop a Budget
You can also pay off debt more easily by creating a budget to organize your finances. A budget can show you what your daily spending habits are. Then, you can make the appropriate changes to repay your debts faster.
For example, you may discover that you spend hundreds of dollars on dining out each month. Consider cutting this back to put more money toward the loan you’re targeting first.
As long as your basic necessities, like shelter and food, are covered, you should have no problem with diverting more of your discretionary income toward your debts.
Pay Above the Minimum Required Monthly Amount
Another tactic for eliminating is to exceed the minimum amount due each month when you make a loan or credit card payment.
This is helpful because more of your payment will end up going to your principal balance versus your interest. That means you’ll be able to pay down your debt balance more quickly over time.
Get a Second Job
Have you ever considered getting a second job or taking on freelance projects? If not, consider doing this to boost your stream of income.
When you generate extra funds regularly, you can more easily repay your loans and other debt.
A wide variety of side-hustle jobs are ripe for the taking. For instance, consider becoming a tutor or doing pet sitting. Every dollar you earn from these types of jobs puts you that much closer to making a huge dent in the debt you’ve accrued.
How We Can Help with Paying Off Debt
The process of paying off debt can understandably be daunting. However, by capitalizing on balance transfers, consolidating debt, or getting a personal loan, you can improve your chances of becoming debt free in the years ahead.
At Kingcash, we are excited to offer easy-to-use money lending services for quick and instant $500 to $750 loans in Canada. Get in touch with us to find out more about how our loans can help you to pay down debt or cover unexpected expenses today.