The debt culture is common in the US, and almost every individual in America owns a certain amount of debt. According to Debt.org, most of these debts comprise medical bills, credit card bills, and student loans.
Around 80% of the Americans struggle with paying the debts. If you are also one, it is necessary to plan the debt payment to achieve your financial stability systematically.
Various financial institutions and advisors can help in settling your debts with proper finance management. It is better to take positive steps before you end up in a financial crisis. Let’s look at how you can settle the debts faster to enjoy economic freedom.
Make Analysis of Your Income and Total Debt
It is crucial to understand how much you earn and how much you owe in total. You may have to start making extra income to settle the debts soon. Make a list of creditors, monthly payment structures, the interest charged, and balance.
Once you get a clear and concise picture of how much you need to pay, you can work on your financial stability goals. Ensure you also include your daily expenditures, medical bills, family loans, groceries & utility bills, and recurring bills.
Go for Balance Transfer Credit Card
Various banking institutions offer credit cards with either 0% interest rate or 0% APR (Annual Percentage Rate). Using a balance transfer credit card, you may transfer your old balance to the new card. So, you pay no interest, and you can speed up the debt settlement process.
When you are asked to pay only the principal amount, you can settle the debt in a limited timeframe. It is one of the best ways for a quick recovery from debt payment.
Get a Loan with Lower Interest Rate
Many experts suggest minimizing your debt balances is best to go for a loan with low-interest charges. Hire a reputable finance management institution to help you with debt settlement issues. They can help you in understanding which loan can be settled if you have multiple loans.
For instance, if you have a car loan, then you can consult an auto refinance agency to clear off the debts at a lower interest rate. You can also go for personal loans that charge lower interest rates than a credit card. If you have student loans in your debt, you can consolidate the student loans and opt for an income-based repayment system.
Settling Your Debts: Pay the Principal Amounts First
The other option to lower your debt amount is to pay more than you have to. Ask your lender if there are any pre-payment charges. If there are no charges, then you can settle debt early by paying towards the principal amount.
Interest is calculated based on principal amount; hence your focus should be the principal amount. Once you clear the principal amount, the interest charges can be paid off simultaneously. Many lending institutions charge a penalty for the prepayment of loans. The penalty fee is often 80% of six months of interest.