There are countless ways one can end up in debt. Perhaps a series of small loans and charges over the years has gotten you there. Or you borrowed for a few big-ticket items you couldn’t afford out of pocket at the time. Or maybe a life event completely out of your control has left you owing thousands. Regardless of how you ended up with the debt to your name, there’s often a universal feeling that comes with knowing you have to pay it off: overwhelm. What are your options? How long will it take? How can you prevent getting even further in debt?
While it may feel like your debt it completely unmanageable, trust us when we say: it’s not. You can get it under control—and we can help. The fact that you’re here and seeking more information, rather than ignoring the problem altogether, is a great start. It shows that you’re aware of the position you’re in and ready to take action!
Below, you’ll find some of our best tips, resources, and tools for getting a better idea of where you stand with your debt and some of the steps you can take to creating a realistic strategy for paying it off.
Assess Your Situation
First thing’s first: you need to take an honest look at your overall financial picture. Including your debts, current income, existing savings, spending habits, credit score, bills, and so on to see what you’re working with. Knowing your full financial picture will help you get an idea of what your next steps should be. If you’re working with quite a bit of extra income, your best options will look different than if you’re living paycheck to paycheck.
Here are some tools and tips that can help you get a better idea of where you stand currently:
- Our SavvyMoney Checkup Tool gives you a comprehensive look at your financial health—including your current cash flow, debts, and credit report—and suggests customized debt payoff strategies, budgeting tips, and more based on the information you provide.
- Calculate Your Debt-to-Income Ratio via the Consumer Financial Protection Bureau.
- Round up all of your outstanding loan and credit card balance information (including remaining balances, interest rates, etc.) and have them at-the-ready to make crunching numbers easier when you’re ready to take your next steps. Typically, your most recent online or paper statements will have all this information included.
Consider Consolidating Your Debts
If you have multiple loans with varying rates, due dates, and balances, debt consolidation is a great option to consider for a few reasons. Rolling all your outstanding loans into one simply makes it easier to keep track of and make one payment each month. Plus, in many cases, a debt consolidation will result in a lower interest rate—which means you could end up with smaller monthly payment. And with a lower interest rate, you may even get on track to paying your debts off sooner.
Here’s a little more information on debt consolidation, how it works, and how it may benefit you. Also, check out our free online LoanSaver tool below to see how much you could potentially save!
Look into Refinancing Options
If you have one major loan you’re tackling—like a mortgage, vehicle loan, or student loan—then refinancing may be an option to consider. Refinancing essentially optimizes that existing loan into a new one with more favorable terms—namely, a lower interest rate. You may also wind up with a better payment schedule or other terms related to the loan. Refinances are most commonly beneficial when it comes to mortgages, vehicle loans, and student loans. Similarly to debt consolidation, refinancing existing debt could result in a lower monthly payment and/or the ability to pay them off sooner!
3Rivers has several options for refinancing. Learn more about:
Know that, depending on your situation, you may not be limited just a debt consolidation or just a refinance. Our team would be happy to help you determine which option would be most beneficial to you—or if you should consider both!
Decide on a Debt Payoff Strategy
While there are several of methods out there related to paying off debt, most boil down, at their core, to two strategies:
- A Snowball Approach: This method involves making minimum payments on all your other debts, while working to pay off the smallest one first. Once that one is paid off, you’d then take whatever monthly payment you were making on it and add that into your monthly payment on the next smallest debt, and so on, and so on, continuing until you’re left making bigger payments on your largest debt. This method is great for keeping the momentum and your motivation up, as you’ll see quick progress with smaller debts being paid off quickly, but could cost you more in the long run since you’re not tackling those large debts first.
- Tackling High Interest Debt First: This approach focuses on paying off your debts with the highest interest rates first, since those are costing you the most in the long run. This method requires a little more patience, as you may not feel like you’re making progress right away, but could result in you paying less on all your collective debt over time.
Learn more about these strategies and how to put them into action here.
Do Your Research
As you start to look into your best options and make sense of some of the common terms related to debt—like debt collection, bankruptcy, debt relief services, and more—make sure you’re visiting trusted sources. Here are some of our favorites:
- Federal Trade Commission’s Getting Out of Debt Guide
- Consumer Financial Protection Bureau’s Debt Collection Resources
- Dealing with Debt Guide via USA.gov
- Debt Management Services via Bureau of the Fiscal Service
Work with a Professional
It’s important to note that there’s no cookie-cutter solution when it comes to paying off debt. Even if you owe the same exact amount as someone else, your current financial situation, interest rates, loan terms, and more may mean that certain options will be much more beneficial to you than to them, and vice-versa. In some cases, a combination of several options will have the biggest impact. We highly encourage you to reach out to a financial expert to help you develop your own unique debt management plan.
Not sure what your best option is for paying down your debts? We’d be happy to discuss your options and help you come up with a plan! Give us a call, stop into your nearest branch, or schedule an appointment today!