When you embark on a debt repayment journey, the goal of being debt free may seem pretty far away at first. Months, or maybe even years from now. This is why I would like to share a few ideas to help you get rid of your debt faster.
Throw your extra cash at your debt
By making the minimum payment only on your cards and loans, you are taking the longest time to repay your debt. You may think that overpaying by £10 or £15 a month is not worth the effort, but on the contrary, it definitely is. To convince you, I suggest you take a look at those online calculators and see by yourself how many months you would be reducing your loan duration by if you paid an extra £15 a month.
So unless your lender has a fee for extra payments, try to throw all possible cash towards your debt.
If you walked back home from work instead of taking the bus, pay an extra £5. If you brought your lunch to work, pay £10. If your parents gave you birthday money, decide on a percentage that would go towards debt, and have a little fun with the rest.
Those little payments may seem like drops in a sea of debt, but they can actually make a big difference.
Transfer to a 0% credit card
If you have a personal loan with an interest rate over 4%, and still a decent credit score, switching your debt over to a 0% credit card will allow you to make a big dent into your principal, since you will no longer be paying interest. Ideally you would keep on making the payments you used to, except it will all go towards the debt principal. Credit card companies tend to charge a 3-4% fee for that transfer, which is why your debt should have a higher interest rate in order to be worth your time. Also, if you have a higher rate but only a few months to repay (say 10% rate and three months left), it also makes more sense to just leave your debt where it is.
Remember to make a note of when the 0% deal is ending, as the cards generally revert to a double digit rate after 12 months.
Make extra money
Sure, it’s more fun to work more in order to save for a holiday or nice clothes, but getting rid of your debt should be your priority right now. So go and babysit neighbours’ babies, mow their lawns, wrap presents around Christmas, tutor some kids, walk dogs… There are tons of ways to make more money, even though you only need to give a couple of free hours per week. You can work on a side business, work a second shift at your job or another company, or simply look for occasional side hustles. I used to be a waitress at weddings on a Saturday night – you can rest on Sunday and be back to work on Monday, and the pay was £90 or more per night. You can bring a cooler and sell cold drinks at a sports game, bake cakes for parties, or cut friends’ hair without compromising a 9-5 job.
Just £10 an hour two hours a week means over £1,000 per year that you can use to shrink your debt even faster!