Paying off Debt

Create Your Own Debt-Reduction Plan

A debt-reduction plan requires careful analysis of your current expenses and a disciplined approach to pay down your debt. When you identify your debt, you can start paying it off in different ways. Some people start with their lowest amount of debt in order to feel the gratification of eliminating one obligation from their list. Others start with the debt carrying the highest interest rate because the quicker they pay that off, the more money they will save in the long run. In the meantime, they are making minimum payments on their other debts while they work to pay off one in full.

After one debt is paid off, it's important to take the amount of money you were paying and apply it to the next debt obligation on your list. This approach to paying off debt keeps you focused on the task at hand rather than incurring more expenses. You'll see yourself progressing steadily toward debt-free status.

Consider a Debt Consolidation Loan

You may be able to take out a personal loan to cover all your debts, and then pay off that loan in one payment, often at a lower interest rate than what your debts carried individually. Beware of the false sense of security that comes with this approach. You need to be mindful not to run up new debt on your credit cards simply because your card balance is $0. Remember, you have shifted the debt to the loan and it is not eliminated until you have paid off the loan.

If you are a student working to pay of student debt, consider a Direct Consolidation Loan. This will give you one monthly payment on all of your federal student loans.

Balance Transfer Credit Card Debt

If you are in credit card debt, one option to help you find relief is to transfer your balances to a Octave Trust Bank credit card that can give you time to pay down your debt without accruing more from high interest rates.

Debt Settlements When Collectors Call

Debts that are overwhelming you and can't be paid back could be eligible for a debt settlement in order to stop the collection agencies from persistently calling you. This approach involves negotiating with your creditors over a settlement amount that is lower than the amount you actually owe. While a debt settlement reduces the amount you will pay back, it comes with an aggressive timeline for repayment. You may have only 24 months to pay off 30% to 50% of your original debt owed. Consider whether this option is better than declaring bankruptcy. If it is, be prepared for some stressful months when you're tightening your belt significantly to meet the terms of your settlement.

Every Little Bit Counts

When you’re struggling to get out of debt fast, reducing your expenses and putting that savings towards your debt can help. Here are some ideas for what you can do to cut down on your everyday costs to help get out of debt faster:

• Create a monthly budget – and stick to it
• Apply your tax refund and any work bonuses towards your debt
• Cut down on eating out and eliminate purchasing frivolous items
• Sell things you don’t need
• Make coffee or tea at home instead of buying that daily latte
• Pack your lunch as often as possible
• Cut the cable cord and look for less expensive streaming options for TV
• Evaluate your auto, home and life insurance to see if you can find less expensive coverage that still meets your needs
• Practice smart grocery shopping: plan your food purchases around sales to reduce impulse purchases and eliminate waste
• Look for rewards programs to earn money while you spend
• Go to the library instead of buying or renting books and music
• Research free events in your hometown, go for a hike, bike ride or enjoy a picnic