Recently, American consumers hit one of the scariest milestones of all time. According to a report from the New York Federal Reserve, Americans now collectively have the most outstanding revolving debt, or credit card debt in U.S. history. In fact, the average household debt is at $137,063. The sad part about this is that those numbers aren’t likely to go down anytime soon.
According to NerdWallet, the cost of living has risen by over 30 percent in the last 13 years. The bulk of this goes to cover medical expenses, followed closely by food and housing expenses. If these numbers don’t serve as a wake-up call, you need to re-evaluate your position. The problem with debt is how unpredictable it is. Even if it’s manageable now, you’re just one emergency away from doubling it.
Understandably enough, though, some things are easier said than done. Considering that the median household income in the U.S. was just $59,039 in 2016, unpaid loans are more likely a result of inability rather than unwillingness. For some people, this doesn’t do anything more than cause some stress about the consequences of too much debt. Luckily, here are a few professional strategies you can use to pay off those loans a lot faster.
1. Pay More Than the Monthly Minimum
Let’s assume you’re somewhere within the average, and you owe about $15,654 in credit card debt. This puts you at a repayment rate of 15 percent APR and a subsequent minimum monthly payment of $625. Crunching the numbers, such a debt should take you about 13 and a half years to fully pay off. At the same time, the chances are still high you’re going to add to that balance while still repaying it.
One of the best ways to finally have all that debt behind you is by shifting a few dollars in your finance books towards the repayment of the loan. For instance, you could pay an extra hundred or so dollars a month to cut down the repayment time by over five years. One of the most common headaches of most debt is that it gains interest periodically rather than remain constant over the repayment period.
At the same time, the median average income doesn’t increase by nearly as much year-on-year, which puts you in an even tighter spot. Regardless of the kind of loan, you’re trying to pay off, setting aside a little more than the minimum every month will help you big time.
This is more so when it comes to saving on the amount of cash you pay on interest, at the same time cutting down on the repayment time. Of course, you have to remember to work within your means. Budgeting is the most important part of handling any kind of money. Just don’t spend more than you can afford to. Additionally, be sure to watch out for those pesky prepayment penalties before fully using this technique.