If you have debt, it can be overwhelming to even know where to start, and actually getting started can be even more challenging. Depending on the amount of debt you have or the age of the debt, you may feel like it’s too late to tackle it and start building wealth.
The good news is it’s never too late, and there are a number of options available to help you work toward financial security and savings. Here are three reasons you should get started now, as well as some tips for how to get there.
Debt payoff calculators make it easy
The first step in tackling your debt is knowing how much you have and what repayment options are available to you. Creating a debt repayment plan and using a loan payoff calculator can help you learn about methods that may work best for your circumstances.
First, enter all of your loan and debt details, including how much you owe, interest rates, and minimum monthly payment amounts. Then, using the calculator tool, you can compare repayment methods and plans to find one that you’re comfortable with. You can also estimate when your debt will be paid off and calculate your savings in interest.
There are many options and debt payoff methods available
- Debt consolidation loans are low-interest personal loans taken out to pay off high-interest debt. This helps you get out of debt faster, so you only have one loan to pay off instead of multiple. However, it’s possible you won’t get a better rate on your new loan than your current debt.
- Using the debt snowball method, you pay off the minimum amount of each account, and then use whatever money is left to pay off the account with the smallest overall balance. Once that’s paid off, you move to the next smallest account, and so on. Because the smallest debt is paid, you can roll the payment you were making on that into the next-smallest payment.
While it’s difficult to contribute to savings while using this debt repayment method, that’s OK. This approach is more about building momentum and focus as it encourages small wins in the process.
- The debt avalanche method focuses on paying the minimum amount of each account, and then using whatever is left to pay off your debt, starting with the account with the highest interest rate. Once that account is paid off, move on to the account with the next-highest interest rate.
For each account you pay off fully, you can put money toward the next account as you eliminate the highest interest rates first. However, it can seem like you’re not making any progress with this method, which can make it difficult to stick to.
- Balance transfers help you consolidate debt and decrease your interest rates. With this method, you move credit card balances to a new card with a lower interest rate, and use the new card to pay off the owed balance of your old card. This may help you save money on interest and consolidate payments, but the lower interest rate on the new card may only last for a limited time.
When looking for a balance transfer card, there are a few things to note. First, most cards will charge a fee, such as 3% or 5%, for the amount transferred. However, there are some cards that don’t charge a transfer fee, so you should look for a card with a 0% or low fee. Next, some cards offer a low or 0% introductory APR when you first open the account for a certain period of time. Consider finding a card that offers a 0% APR to start, but be sure to pay off the debt before the end of the promotional period before the interest rate increases. Finally, consider a card with no annual fee.
You can create a more secure financial future
Whether you’re starting a family, putting yourself or kids through college, purchasing a new home, or thinking about retirement, having a goal of creating a more secure financial future for yourself and your loved ones is important.
And developing a plan for unexpected emergencies is critical, so you need the best debt relief services. In fact, experts suggest having at least three-to six months’ worth of expenses saved in an emergency fund.
When you’re in debt, thinking about these expenses or an unplanned emergency can be overwhelming because it could mean getting even further in debt. However, by tackling debt now, and formulating a plan to build wealth for the future, you’re ensuring you’re more prepared each day for the unexpected and future expenses.
Caitlyn Callahan
Caitlyn is a freelance writer from the Cincinnati area with clients ranging from digital marketing agencies, insurance/finance companies, and healthcare organizations to travel and technology blogs. She loves reading, traveling, and camping—and hanging with her dogs Coco and Hamilton.