Three tips to help you get out of debt sooner
Are you
battling to pay off your debt? These tips might help you cut interest and
eventually pay off your debt sooner.
Many South Africans struggle to manage their finances and are plagued with debt.
The frustrating thing with debt is that in most cases you pay far more than you borrowed.
Don’t take out more debt
Don’t make your debt grow more than it already is. For instance, avoid taking out more debt to pay for the one you already have.
Don’t put more purchases on your credit card. There is no point paying and then taking out more debt.
Pay more than the required minimum amount
Skipping payments will affect your credit score and will result in you having to pay more. So, it is important to make sure you pay the required minimum amount, however, to finish paying your debt quicker, it is advisable to pay more than the required minimum amount.
When you pay the minimum amount, most of the money goes towards paying the interest, fees, and only a small amount goes towards the amount you owe.
Paying more than the minimum amount will go a long way in cutting the interest portion down.
This is because the interest rate is charged on a daily basis.
According to moneyonefcu, putting more money in will also increase your credit score, because if you’re only paying the minimum, your balance remains high relative to your total credit limit.
READ: Five smart tips for cash-strapped South Africans
Make bimonthly payments
The interest rate on your debt is calculated on a daily basis.
Making more than one payment goes a long way in reducing your debt. This is one of the tips recommended by the Central bank.
According to debt wave organisation, it is advisable to pay before each month's interest is calculated.
This at the end will allow you to make double the payments per year.
Consolidated Credit states: ‘Consolidated Credit states: ‘since interest is added at the end of every month, debt restructuring means fewer months where interest charges are tacked onto your total bill’.
READ: Four powerful tips to help couples master their finances
Image courtesy of iStock/ @designer491
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