Wouldn't it be nice to be on holiday enjoying a view like this? Wouldn't it be even better if you could do it using your savings rather than racking up a mountain of credit card debt?
The reality is, most of us pay for holidays on credit because we are desperate for a break from the grind of daily life, which includes the ongoing stress of debt. The problem is, this is only a short term hit and once the holiday is over, reality sinks in that you now owe more debt and have more stress than ever! Sound familiar? The good news is, there are ways to eliminate debt FAST and get back to savings so you can enjoy a debt free, stress free holiday in the Greek Islands! If this sounds good to you, keep reading!
Most people spend more than that earn - it is a proven fact and why there are trillions of dollars of debt out there in the world and so many struggling with the burden of managing it.
While some choose to face it head on, others choose to bury their heads in the sand. The truth is, this is the worst thing that you can do. The type of debt used to bridge the regular shortfall is generally super expensive - credit cards, personal loans, payday loans - interest rates are often 20% per annum or more!
Other factors also come into play that can impact your ability to manage debt too. Sudden job losses, unexpected and expensive bills, relationship issues or medical problems can throw you off track.
Not many people realise that you can actually negotiate a settlement with your creditors to clear your debts quickly and often at a substantial discount to the amount you currently owe. Lenders and debt collectors are in the business of making money, and if they can see that your situation is dire and the likelihood of being paid in full is low, they will be willing to negotiate a reduced debt settlement with you.
It is important to have a clear strategy to present a carefully crafted debt settlement proposal to present all the right information and give yourself the best chance of a positive outcome. Whilst a number of decisions are data driven these days, when it comes to negotiation a debt settlement, you are often dealing with a person, so giving them what they need to make a decision in your favour is in your interest.
Settled. is a company that can help you understand the requirements and create your own debt settlement offer. They unlock the vault on debt negotiation and have a automatic debt settlement letter generator that makes this process super easy for you.
OK, so I hear you say that awesome, but I literally have no money to offer a debt settlement of any amount? Thats OK, below are some tips to help you pay off your debts sooner, or read our article on How To Raise Money To Make A Debt Settlement Offer if you like the sound of that option!
Tip 1: Pay more than the minimum amount
It doesn't matter how much more you pay, the point is, just make sure you do! Did you know that the average minimum payment on a credit card is 2-3% of the balance?
Assuming that the card had 0% interest, it is going to take you 33-50 months to repay that debt. Thats 3-4 years! Throw interest of 15-20% on top and that timeframe is going to blow out. Sounds horrible doesn't it?
That is why paying more than the minimum amount is so important, whether it is a credit card, personal loan or mortgage. You will minimum interest charges and reduce the amount of time it takes to repay the debt.
Tip 2: Pay off high interest rate debts first
Whilst it may feel good to pay off that smaller balance debt first, the smart play is to tackle your highest interest rate debts first. These are the debts that are costing you the most money and holding you back from financial freedom the longest!
Don't know what the interest rate is on your debt? That is a big problem but one you can fix really easily. Simply get hold of your last statement and it will tell you or get on the phone to the bank or lender and find out. Whichever way you do it, just make sure you do! Once you have all the information, write your debts down in order of highest interest rate to lowest. Tackle the one at the top of the list first and make sure you are paying more than the minimum like we discussed in Tip 1!
Tip 3: Pay instalments weekly or fortnightly
Most people pay their loans on a monthly basis, but here is a simple change you can make that will save you thousands in interest and years off your loan term. Change your payment frequency to weekly or fortnightly. It is that simple.
Almost every loan calculates interest daily, so the sooner you make a repayment the better.
Let's look at a simple example. Rachel is paying $2,000 a month off her mortgage and the balance is $500,000. If she waits until the end of the month to make the payment, she is being charged interest on the full $500,000 the entire month! If she changes the repayment to $500 a week, she will be charged interest on $500,000 for 7 days, $499,500 for 7 days, $499,000 for 7 days and $498,500 for 7 days etc. It might only seem like a small amount, but trust us, over a 25 year mortgage this makes a MASSSIVE different to how much interest you pay and how long it takes you to pay back your loan.
BONUS BENEFIT: Here is another benefit of paying weekly or fortnightly. Let's use the same example of Rachel above. $2,000 a month x 12 months = $24,000 a year in repayments $500 a week x 52 weeks = $26,000 a year in repayments Psychologically, most people would think payment $2,000 a month or $500 a week is the same. But the truth is, by paying $500 a week you end up paying more off your loan each year, reduce interest being charged and shorten your loan term! Its ticks all round - just do it!
Tip 4: Negotiate interest rates
You might think this is impossible, but now more than ever lenders are being open minded to their customers situations and they recognise that working with them to have payments continue is a much better outcome than them stopping payment altogether.
So how do you negotiate an interest rate reduction? It is best to contact your lender and present them with the facts and provide supporting documents where you can. The first port of call should be your direct manager or ask to speak to their financial hardship team. This will get the ball rolling. You may get a temporary freeze on all interest payments, a reduction or a combination of both. The point is, if you don't ask, you want get so its worth getting on the phone to find out. It will be one of the best returns on investment for your time.
The truth is, being in debt is tough work. But like anything in life, if you want to succeed you need to have clear goals, a clear plan and most importantly, you need to execute. If you implement these 4 tips to your current debt management practices you will be taking a huge positive step forward toward financial freedom.