Once your budget is set, you’ll see how much money you have left over. Work out how much of this you can afford to put towards extra repayments to clear your debts. If you’re not happy with how much is left over, check your budget to see whether there are some areas where you can cut back on spending.
Prioritise your debts
Continue to pay at least the minimum repayment on all your debts.
With a clear idea of how much you owe on each debt, and how much money you can set aside as extra repayments, you need to work out which debts you’re going to pay off first. Depending on how much and what type of debt you have, there could be a couple of options open to you.
You could start by:
paying off the debt with the highest interest rate first; or
paying off the smallest debt first (so you feel a sense of achievement).
See making repayments for more details on how to prioritise different types of debts.
Regardless of what you focus on first, make sure you continue to make at least the minimum repayments on all of your debts to avoid any late payment or default fees.
Make it automatic
A great way to stick to your plan of paying off each debt is to set up an automatic payment from your bank account. Arrange for your extra repayments to go directly to your loan or credit card each time you are paid. This way, you won’t forget to make the extra payments, or be tempted to skip it.
Then, as you pay off each debt, cancel that automatic payment and create a new one to transfer the extra money to the debt that is your next highest priority. Remember to continue making the monthly repayment on each debt at the same time.
Close each account as your debt is paid off
If you are paying off credit cards, remember to close the account once you’ve paid it off. See how to cancel a credit card to make sure you do this properly.
Consider refinancing or debt consolidation
It may sound like a good idea to pay someone to fix your credit problems or roll all your loans into one loan. But, before you do this, consider if this really is the best option for you or if there are other ways you could go, to get help for free – for example from a financial counsellor.
Consolidating or refinancing loans can work for some people if it means they pay less in fees and interest. For others, it may only be a short-term fix, especially if they can’t meet the repayments on the new loan.
Contact us Toll Free 1300 656 414 or visit our webpage – www.assetfinance.com.au to find out more about consolidation and refinancing debts.