Co-author: TJ Ryan
We are still collectively paying interest on around $31.7 billion credit card debt as of November 2016 (ASIC), and between credit cards, store cards, and personal loans, we can get into financial strife before we realise it. So here is an easy process and our tips to get out of debt.
1. Face up to what you owe
Grab a piece of paper and a pen and write down the outstanding balance of all personal debt that you currently owe. That includes credit and store cards and any other personal loans. Next to each outstanding balance, jot down the interest rate that you are paying on that debt.
2. Check out what else is on offer
When you see it in writing, you could be surprised by how much interest you are paying on some of your loans.
Canstar analysis shows that the average credit card interest rate is in excess of 15% for standard credit cards, and around 18% for rewards credit cards. Even the average car loan interest rate is currently in excess of 10.30% as of our November 2016 personal loan star ratings.
Our first tips to get out of debt always involve making sure you’re not wasting money and growing your debt by paying too much in interest payments.
3. Consolidate your debts
How many credit cards do you have? How many car loans or personal loans? The more loans you have, the more difficult it is to keep track of them all, so consider whether any of your loans could be consolidated together – preferably onto a lower interest rate.
Just like mixing different ingredients in a bowl to make one meal, combining different debts into one loan or one card makes it easier to repay them in the form of one debt.
4. Work out your repayment plan
The most important thing when it comes to personal debt is to have a plan to pay it back at some point! Try our personal loan repayment calculator to put an affordable plan in place.
5. Be realistic
Debt usually doesn’t appear overnight; it gradually builds up over time. And likewise, paying it all off happens gradually over time as well. It’s important to recognise your progress and to reward yourself along the way – without spending more money – and to avoid feeling overwhelmed about it all.
Our number one tip for how to get rid of debt? Believe you can do it, and work smarter, not harder, to get it done!
More tips for repaying your debts
The following Canstar Guides are here to help you understand and work through the debt consolidation process, whether that’s via debt consolidation loans or a credit card balance transfer:
- How to know if you have too much debt: Have you taken on too much debt? How to separate your debts
- What is debt consolidation? What is debt consolidation? Personal loan vs credit card balance transfer vs home loan vs repayment plan and 3 options to consolidate and repay credit card debt
- How to get rid of debt: Our 7-step plan for getting out of credit card debt and 5 tips to pay off your credit card faster and Tips for repaying your debt faster and Using psychology tools to help repay your debt and Spring cleaning your debts
- Where to get help? Be wary of debt solution companies – choose financial counselling instead and Financial counsellors are here to help and What are debt repair companies?