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7 Tips to Eliminate Debt Faster

posted on Wednesday, February 2, 2022 in Education

image of bills on the floor with dog sitting next to a woman.

Consider using these tips in the new year to take control of your finances.

One key ingredient to saving more money is to eliminate debt. To help consumers cut down on debt in the new year, here are 7 tips on how to pay down debt faster.

  1. Use tax refund — A new year brings a new tax season. If you are expecting to receive a tax refund in 2022, consider putting all or a portion of that refund toward a debt you want to eliminate this year.
  2. Put salary increases toward debt — If you receive a salary increase in 2022, use part of that to increase your monthly debt payments to pay them off faster.
  3. Put credit cards away — If you have excessive credit card debt, continuing to use your credit cards will only exacerbate the issue. Put them somewhere safe until your credit card debt is in a more manageable position.
  4. Cut the clutter — If your home is full of items you no longer need or use, get rid of them. Find all the items you no longer need that may be of use to someone else and post them for sale online. Use the proceeds from those sales to pay down debts.
  5. Switch monthly payments to biweekly — A small change you can make to help pay off debts faster is to switch your payment schedule from monthly to biweekly. Schedule half of the amount due to be paid every two weeks, and you will be end up making 13 payments in a year rather than 12. 
  6. Consolidate debt under a lower interest rate — If you are paying off several debts at various interest rates, you may want to consider consolidating them under one manageable interest rate. Doing so will reduce the number of bills you’re paying and may also reduce the total interest rate on your loans, allowing you to pay them off more quickly.
  7. Create a spending plan — If you feel like you are getting buried by a number of debts, you may want to consider implementing a more specific spending plan. Spending plans include the avalanche method — making the minimum payment on all lower interest rate debts and using excess funds toward the debt with the highest interest rate.  You could also use the snowball method — using excess funds to pay off the smallest debt first, then re-allocating that payment to the next smallest until all your debts are eliminated. These spending plans can help you eliminate debts faster while giving you flexibility when unexpected expenses arise.

More Information

To learn more ways to reduce debt, contact a banker today

These tips are provided by the Iowa Bankers Association. 

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