Nobody wants to be in debt, but sometimes we find ourselves in a position where we have got ourselves into a lot of debt. It might seem like they are pushing down on our shoulders and that there is no way of seeing the light of day, but there is a way to make things a bit easier. Here are some simple tips for prioritising debt repayments.
Compile a List of Your Debts
The first thing you need to do is make a list of all your debts. This will men gathering up all the paper work for all of your different debts and compiling it into a pile, list or some other way of being able to look at them all at the same time. You will want to see clearly what each debt entails so that you can get a good idea about what you financial position actually looks like.
Work Out Exactly How Much is Owing
With all of your debts, work out exactly how much is owing on each one. This includes looking at the interest, how much you are paying, and what sort of interest it is, so that you have an idea about the variable amounts with each one. What are the monthly payments, and what annual fees does the debt attract?
Order the Debts
Once you have your list, put it into order of which ones have the highest interest rates, penalties and fees. This will give you an idea about which ones you are treading water with, and which ones could possibly be paid off sooner rather than later. Having a good idea about where your financial position is really at, will help you to see the big picture, rather than looking at the forest from within the trees, as all you see is trees.
Now that you have your list and can exactly what each debt entails, have a look to see which ones you can consolidate. Ask yourself, if there are any of those debts that could save you money if you consolidated them into the one loan? Consolidating can often be a good idea because rather than spending a lot of money paying off the interest and not getting forward, you might be able to just be paying one monthly repayment on a loan that covers all of them.
Work Out How Much More Than the Minimum Would Help You
Rather than continuing to pay the minimum monthly repayment and only ever paying off the interest, it might be a good idea to start paying a little bit more than the minimum each month. If you did pay more than the monthly minimum, how much would you be paying, and how much would it take for you to pay off before it started to be of help to you and your situation?
This article was contributed by Michael Craig on behalf of Dreamloans – a leading car-finance broker based in Adelaide, Australia.