How to pay off your debts quicker?
Covid-19 has widely affected the debt component in every household globally. If considering only Canada, it could be seen that the country carried an outstanding debt of around $2.5 trillion
in one year after the pandemic hit us and the majority of which was the mortgage. Debt helps us in the needy times but it certainly poses a burden on us and restrains us from stepping forward. So if you have no more debts Vancouver, you can save your cost of borrowing or apply for new credit. Here are a few ways which can help you pay off your debts quicker-
1. Increase the frequency of payment
Paying more than once a month reduces the burden of your debt. This keeps you on track with the amount you owe. If you are using a credit card, paying its bill more than once a month may also reduce your credit utilization ratio which is nothing but the percentage of used credit out of the total available. This is majorly considered while calculating the credit score.
2. Paying more than the minimum amount
This is the most basic way of paying off your debt faster. All you have to do is pay more than the decided amount every month. This extra amount should be adjusted towards the principal amount which would eventually reduce the burden of interest. Don’t forget to check or add this clause in the terms and conditions of the loan.
3. Consider paying off the most expensive loan
The higher the amount of the loan, the bigger the burden on the debtor. Here, the most expensive loan denotes the one with the maximum interest rate. Repaying such a loan would reduce the maximum burden of interest and hence, the overall cost of debt. Once, this is done, repeat the process with the second highest interest rate, and so on. This is named the ‘avalanche method’ of repayment.
4. Paying off the smallest balance first
This is exactly the opposite of the above method. This one is the ‘snowball’ method of debt repayment. It means paying off that debt first which involves the smallest amount. The smallest amount of debt needs minimum time to repay. Hence, repayment of every balance may give you confidence and build your momentum. Check this strategy in depth to know if it’s in your favour.
5. Debt consolidation
It simply means taking a loan at a lower interest rate to repay all other loans of higher interest rates. So this way, the debtor has to make only a single payment with lesser monthly installments. The amount saved can be used to pay off the debt quicker. This works great if no further loan is taken.
Keeping a track of all the debts/bills may also help the debtor. People may look forward to debt management services Vancouver if they are unable to do it on their own. If you’re from Vancouver or Surrey and looking for these services, Debt Consolidation BC is the ultimate search.