How To Reduce Debt: 4 Ways

Post-GFC, Australians have been improving their savings record. We are now more inclined to pay extra off our mortgages and to rein in our credit card binges, which is all great news. As an aggregate, households are now saving at levels not seen for more than two decades.

We do need to keep up the good work though, and on an individual level, paying down our consumer debt is a fantastic way to both decrease your stress levels and make inroads into your financial security. Here are some tips on how to go about it.

Determine Your Current Situation

Person loans, store cards, credit cards – it can be very easy to turn a blind eye to mounting levels of personal debt, particularly if it is spread across a number of financial products. Jump onto your computer and make a thorough and detailed list of:

  • any personal debts that you have
  • the interest rate being charged on each debt
  • your current regular repayment amount

It may look similar to the following:

Product Amount Owing Interest Rate Current Repayment Amount Per Month
Credit Card

$6,000

18.50%

$120

Credit Card – Basic

$4,000

10.00%

$80

Car Loan – 7 years

$15,000

14.00%

$280

 

Consider Your Options

Debt Reduction

When you see it in writing, you may be surprised how much interest you are paying on some of your loans! Broadly your repayment options are to:

Have A Plan to Pay It All Off

Personal debt – and credit card debt in particular – can linger for years if we don’t have a plan and a repayment schedule to extinguish it. Try our personal loan repayment calculator to put a repayment plan in place and adjust your other personal spending to enable it to happen.

Finally: Be Patient!

Barring a single unexpected event, personal debt is something that gradually builds up over time. Logically, it also takes time to readjust your spending patterns in order to pay it off. Whether it takes one or five years to make real inroads into your debt, the most important thing is getting started and being persistent.

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