Money worries are on the up in the US following a few years of drops, with 65% of Americans losing sleep over money according to a 2017 poll. This is understandable, with the latest figures suggesting that American consumer debt has topped $3.1tn. With an average household debt burden of about $8,000, it’s important for many people that they find a way to get rid of the burden – and fast.
With the political and economic landscaping seeming to shift drastically week on week, it can be difficult to reconcile handy debt reduction tips with the regulations and policies that could affect your choices. What’s the best course of action to reduce your debt in a considered and cost efficient manner?
Refinancing Your Debt
A key way that many seek to deal with their debt is through refinancing. Products such as balance transfer cards offer a low balance and small repayments over a long period, and personal loans offer favorable APR compared to the interest on large overdrafts and some other types of loan and credit cards. But should you borrow? There are two main considerations for the lifespan of your loan; inflation and interest rate. Currently, US inflation is set to rise and this is good news for debtors – your loan amount won’t rise, but your money may well. Conversely, increased interest rates mean that the level of interest you pay on your loan will increase. With an increase rate set for a rise soon too, look at your options and find a balance.
Speak To Your Creditors
Another option is to speak to your creditors. Whereas most will reserve the right to refuse any alterations to terms, the case, properly made, could influence them to reduce your rates, or issue a repayment holiday. Bear in mind that for some products, interest rates are locked in – like mortgages. Discussing your finance with a creditor can be a nervy business, but remember that they can’t arbitrarily make your terms worse or end the credit agreement if you have abided by the terms.
Employ The Snowball
If you’re burdened with several different debts, consider using the debt snowball method. Psychological studies have shown that using the ‘quick win’ snowball methods improves feelings of mental well being and drives determination to tackle further debts. The trick here is to tackle the smallest debt first; avoid the larger balances, even if they have lower interest rates. This gets the debt off your chest and gives you a sense of achievement – very smart.
Debt is a huge challenge for people across America but it doesn’t have to be your downfall. Follow these smart tips and you’ll be able to see if you can chop your balance to size.