When you are in debt, you should aim to repay it as quickly as possible. Being in debt can be a good thing because it gives you access to assets you may need. But it can also be a bad thing especially when you pay excessive amounts of interest.
There are numerous ways to repay your debt quickly:
- List each of your debts in order from the largest to smallest interest rate. This will give you a better idea of how much you debt you have to pay off.
- Put any extra funds toward the account with the highest interest rate. Keep in mind that the interest rate determines how quickly your debt will grow. The longer you keep debt with high interest rates, the more you’ll end up repaying in the long run.
- Pay bi-weekly rather than monthly. Just make sure that your budget can handle these larger payments. This is a fast way to repay your debt quickly.
- Make extra payments on your credit cards, loans or mortgage. Use your bonus at work, or when you get a tax refund for instance. If you have access to extra cash, make sure that you put it towards repayment of your debt.
- Contact your lenders and explore options to negotiate and improve your loan terms. If your negotiation efforts pay off you may get lower interest rates, which means that your terms are more favourable in the long run.
- Refinancing can be smart, but is risky. As long as the new loan has a lower interest than the loan that’s being paid off, it’s a smart move. You need to be prudent about making repayments so that you don’t lose your asset.
- Create a budget that shows your income and expenses.
- Stop borrowing. This is one of the easiest ways of ensuring that you repay your debt quickly.
- Set up an emergency fund.
- Get a second job.