6 Easy Ways to Reduce Your Debt - CCCU
Thursday, January 30 CCCU
6 Strategies for Reducing Your Debt with Ease
Getting out of debt faster may be easier than you think. Read about 6 ways to reduce your debt and learn how to understand and execute the basic strategies to save you money.
Debt is a stressful burden to carry at any size for any individual, but you’re not alone. On average, most US households owe over $8,000
in credit card debt, while college grads typically owe almost $30,000
in student loans. So, how do you get out of debt? At Consolidated Community Credit Union, we’re dedicated to helping you and our members maintain your financial health
by offering the best strategies and tips for getting out of debt.
1. Go cold turkey with credit cards
We always tell our Portland credit union members that the first step to reducing your debt is to stop accumulating more. However, we know that’s easier said than done. If you tend to fall back on your credit cards to cover unnecessary expenses, the best strategy to overcoming your debt is to stop using them
altogether –– at least for a while. Try leaving your credit cards at home or hide them away if you want to avoid the temptation of shopping online or using them altogether.
2. Build a savings account
While you might think you should be using all of your available funds to pay off your existing debt, saving money is crucial. Building a savings account will prevent you from going deeper into debt while also giving you an emergency safety net. When you have a savings account –– particularly an emergency fund
–– you’ll be able to use the money for unanticipated expenses that will prevent you from going into more debt if life hits you with an unexpected event.
3. Pay more than the minimum payment
When things get tight, sometimes all you can afford is the monthly minimum payment
. However, taking the longer route means paying much more in interest over time. If you can manage it, try to pay more than the minimum amount due on at least one of your accounts to reduce what you owe quicker. When an account is paid off, start making higher payments on another one as a strategy to expedite things. Continue this process until you’re down to one account, and pay as much as you can each month until you’re debt free.
4. Make additional small payments
Along with paying more than the minimum amount due, making additional small payments on each of your accounts can be beneficial. Doing so allows you to accumulate less interest overall. Also, you’ll improve your credit score by chipping away at your total credit utilization. So, in addition to making your regular monthly payments, you may want to schedule another small payment on each account as an added bonus. Even an extra $10 or $15 each month will make a big difference in your journey towards going debt free.
5. Focus on paying off one account at a time
Another strategy to reduce your debt is to focus on paying off one account at a time by making larger payments. Some people choose to pay off whichever account has the highest APR first, which saves money on interest, and is generally a good approach to take. Others opt to pay off their smallest accounts first, which can motivate you to maintain momentum as you repay your debt. Keep in mind that you’ll still have to pay at least the minimum amount due on each account to avoid delinquencies. When a credit card or loan is paid off completely, focus on tackling the next one as you move towards becoming debt free.
6. Consolidate your debt
Debt consolidation can be an excellent solution for reducing your debt for qualified individuals. Consolidating your debt works by getting a low-interest credit card
or a fixed-rate personal loan
where you place what you owe into one account. You can then either transfer your balances to the credit card or pay off all your debts with the lump sum from the consolidated loan. Going this route can be a great option for those with good credit because you’ll not only get a better interest rate, but you’ll only have to manage one monthly payment.
Building a better financial future with CCCU
With the right strategies and motivation, reducing your debt is definitely possible –– and eventually, you can be completely debt-free! CCCU offers low-interest
Visa credit cards with free balance transfers and fixed-rate personal loans as well as convenient online bill pay
system to keep you on track. To start taking control of your finances, apply today
or stop by one of our Portland credit union branches to begin building a better financial future.