Are you facing the new year with a mountain of debt looming behind you?
You’re not alone. The average Millennial is carrying over $78,000 in debt, while Gen Xers are lugging around a whopping $135,000 in unpaid debts.
Are you wondering how to aggressively pay off credit card debt or student loans? Here are some expert tips to help you pay off debts and improve your credit score.
1. Know What You’re up Against
If you have multiple credit cards, student loans, personal loans, and a mortgage, it’s easy to lose track of exactly what you owe.
Your first step is to sit down and put everything into an Excel worksheet. Be sure to include:
- The total amount of debt you owe
- The interest rates
- The minimum payment amounts
- The payment due dates
The final numbers might come as a bit of a shock, but they’ll provide the motivation you need to move forward.
2. Choose a Plan of Attack
There are a few different strategies you could use to pay off debts. The most common ones include:
- Debt avalanche (pay off the debt with the highest interest rate first)
- Debt snowball (pay off the smallest debts first)
- Debt consolidation (roll balances onto a new card or get a loan to pay off debt)
- Debt management through a nonprofit debt counseling agency
Remember, your ultimate goal is to avoid a bad credit score. Any of the methods listed above can work, so it’s up to you to decide which makes the most sense for your financial situation.
3. Increase Your Payments
If you keep chipping away at those minimum payments, you’ll never get out from under that pile of debt. Using the snowball or avalanche method, pay more than the minimum amount on one card until it’s paid off, then move on to the others.
Another idea is to make more than one payment each month. Some credit card companies will allow you to make an additional payment during the month specifically towards the principal, so check with your lender to learn about your options.
4. Celebrate Small Wins
It goes without saying that in order to pay off debts you have to keep your spending habits under control. This is a necessary step if you want to get out of debt, but it can be discouraging if you’re constantly living in a state of self-denial.
Find a balance and stay motivated to achieve your goal by allowing yourself to celebrate little victories. Did you pay off your first credit card balance? Treat yourself to your favorite milkshake, a bottle of wine, or a night out with friends.
Of course, your “wins” should align with your current goals of paying off debt and saving money. It won’t do you any good if you pay off a credit card and immediately max it out again with a trip to Tahiti.
Successfully Pay off Debts in 2022
If you’ve been wondering how to pay off credit cards or student loans, the tips listed above should help. With enough time and effort, you can pay off debt and take control of your finances again!
Now that you understand how to quickly pay off credit card debt, what should you do next? Keep browsing our site for more stellar financial advice.