It may sound too good to be true, but it’s not — the best way to pay off debt can actually save you money. Here are just a few strategies
MAKE MONTHLY PAYMENTS ON TIME – If you’re looking for the best way to pay down debt that can also save you money, consider starting by making sure you pay all of your bills on time.
- Make Monthly Payments on Time. Avoid late payments that can cost you dearly. If you’re not organized, due dates can slip past you. You can save money by avoiding unnecessary late fees — or even worse, reconnection fees for utilities, phone and cable. Directing money that would otherwise be wasted toward your credit balances is one of the best ways to pay off debt. And there are more savings in store, too. Lenders charge higher interest rates to borrowers who pay late. Regular on-time payments can improve your credit score over time and get you lower interest rates in the future. To get into the healthy habit of paying monthly bills on time, mark all due dates on your calendar, set aside specific dates to sit down and pay your bills, and consider putting some bills on automatic payment.
- Create a Budget Planner. Try the glass-half-full approach to financial planning. Instead of seeing your budget as painful loss, see it as a power tool to turbo-charge your savings. To set up an accurate budget, save all household-expense receipts for one month. Categorize them so you see where your money is going. Then create a budget planner by listing all of your payments and their deadlines. Use the budget planner to cut back on household expenses, especially costly indulgences and unnecessary expenditures. You’ll be surprised how much money you can save with a simple budget planner.
Make Biweekly Payments Instead of Monthly. Making those monthly house-auto-student loan payments can be painful — pain that continues for years and years. One of the best strategies to pay off debt and save money is to make biweekly payments. It’s an easy, healthy habit to pick up because you actually feel it less, and it can save you tens of thousands of dollars in the long run. Here’s how it works: Your monthly sum is split into two halves that are paid every two weeks. Since there are 52 weeks in a year, that’s 26 half-payments — or 13 full payments — annually instead of 12. The extra money is applied to reduce the principal of your loan.
Just that one extra payment can save you tens of thousands of dollars in interest and shave years off your loan. For example, let’s say you finance a mortgage of $250,000 for 30 years at 4.25% interest. Using the AutoPayPlus mortgage loan savings calculator, you see that by making biweekly payments, you save a whopping $30,543 and pay off your loan 52 months (more than four years), earlier. Use the calculator as your roadmap to find the best program to reduce debt on all your new and existing loans.
AutoPayPlus can help you pay down debt faster. Withdrawals from your account every other week fit conveniently with paychecks and your monthly budget, while an extra half payment twice a year toward principal reduces interest over the life of the loan. Please visit our website to learn more about smart loan repayment strategies.
According to a study published in the European Journal of Social Psychology it may not take that long to replace old bad habits. It took an average of 6 days for participants to form new, healthier habits — positive, life-changing behavior in a little over two months! With a time and motivation, you too can break the destructive cycle of debt.