Do a debt overhaul
The first thing you should do is figure out how much debt you have, where you owe it and how much it all costs. This includes any loans, credit cards, lines of credit and even HELP debts if you are making these repayments. If you have multiple debts, you will likely be paying different interest rates and fees which can affect how much you end up repaying in the long term. By doing a debt overhaul, you can visually see exactly how much you owe and what your options are in terms of managing these debts.
Create a realistic budget
Compare how much you earn, how much you owe and how much you are currently spending on other expenses. Create a budget based on this information to see whether there are any non-essential expenses you can forfeit until your debts are under control. Clearly outline:
- Your current total income (from employment, investments, rental income etc.)
- Your essential expenses: groceries, living expenses and bills
- Your additional expenses: this can include your Netflix subscription, gym membership or monthly nails appointment
When you are able to visually see your current income and expenses, you can identify exactly how much you can put towards your repayments. You can identify any expenses you may be able to live without, and what you are willing to sacrifice to better manage your debt.
Make your repayments on time
Managing your debts is often synonymous with time management. Making your repayments on their due dates can prevent late fees and/or defaults on your loans. Most lenders allow you to set up a direct debit from your bank account either weekly, fortnightly or monthly, to avoid needing to manually transfer funds on specific days. This way, all you need to do is ensure there is enough money in your account on your debiting days.
Additionally to incurring extra fees, missing/making late repayments also affects your credit score. If your credit score is low, this will make accessing credit more difficult in the future.
Increase your monthly payments
If you are only making the minimum repayment for all of your debts, not only will it take longer to pay off your debt but you will also likely pay more in interest and monthly fees. Even if you increase your monthly repayments on some of your loans and continue paying the minimum on the remaining ones, this will still end up saving you money in the long term.
For example, if you have a credit card with a 15% interest rate, your debts will accumulate by 15% each month. If you increase your monthly repayments, the amount that is subject to interest decreases.
Consolidate your debts
If you have multiple debts that you are finding difficult to manage separately, you may choose to consolidate your debts with a consolidation loan. A consolidation loan is used to streamline all of your different repayments into one repayment plan. This can save you money on interest and monthly fees, as you will likely be paying different amounts on all of your loans.
Before deciding on a consolidation loan, you should compare whether you will end up saving money after factoring in interest, fees or any additional changes. If it does not end up being cheaper, a consolidation loan may not be most suited to you.
Create an emergency fund
While it may seem counterintuitive to create an emergency fund while trying to pay off your debt, it might prevent you from incurring further debts in the future. Having a ‘safety net’ that you can use when an emergency rises can defeat the need for a credit card, personal loan or other credit solution, which can help you better manage your current debts without creating even more. Ideally, 12 months of living expenses is a great foundation for an emergency fund; however, even just having $1,000 sitting aside can be helpful in an emergency.
Find a more affordable lender
If you have a high interest rate and/or high monthly fees, this can mean you are paying more back on top of your principal amount. Whether it’s a loan or a credit card, there are a lot of lenders available to you that may be able to offer you a better deal. You may consider using a comparison site to see if another provider can offer lower interest or fees, or more appropriate repayment terms.
Jacaranda Finance offers affordable personal loans from $1,000 to $15,000 to eligible applicants. We are one of Australia’s fastest lenders; we delivered the very first 60-second payout nationwide. If you are searching for a different lender to provide you with a quick loan, Jacaranda Finance may have a loan option better suited to your needs.