Home Loan Tips

You can chuck the reminders into a garbage can, but that won’t make the debt go away. You can’t wish it away. But you can pay it down with determination. Here are some ways to pay off debt:

Pay more than the minimum; first, break the habit of paying only the minimum required each month. Paying the minimum is usually 2% to 3% of the outstanding balance which only prolong the agony. Besides, it’s just what the banks want you to do. The longer you take to repay the charges, the more interest they make which results the less cash you have in your pocket. Be aware of playing their selfish game. Rather, bite the bullet and pay as much as you can each month. If your minimum payment is $100, double that to $200 or more. Make a few sacrifices, and you will find the extra dollars needed to raise your debt repayments dramatically. Those raised payments will save you hundreds, if not thousands, in interest payments plus you will get out of the hole you’ve dug for yourself much more quickly. This isn’t fun but it sure beats living a hand-to-mouth existence, fearing bills each month.

Cash out your savings account; you could cash out your savings and investments and use the proceeds toward debt repayment. I know that no one wants to do that but sometimes it’s just Foolish not to do so. Even when debt interest is at 12%, your investments would have to pay more than 18% before federal and state taxes to equal that outflow of dollars. A doubt arises that the dollars in your savings account are earning anywhere near that rate of interest. Pay off debt and it’s the same as getting that 18% return without any risk on your part. The higher the interest rate on your debt, the more eye-catching repayment versus investment becomes.

Finagle family and friends; perhaps your family or friends could float you a loan. Hope no one else knows, trusts, and loves you like they do. Unless you’re really the black sheep of the flock the chances exists that you’ll get a very favorable interest rate. They may even accept a late payment or two. But if you want to maintain the relationship, it’s essential to keep things on the straight and narrow by using a written agreement. You should clearly set up the interest and repayment schedule in writing to avoid misunderstandings and hard feelings. And there is no doubt that you must be careful about adhering to that schedule. Otherwise, you can forget the family reunions and birthday presents.

The most important thing is to start now, neither tomorrow nor next week. Start tackling your debt now. Your older self will thank you for the way you will follow to pay off debt.