If you’re a homeowner, you may be trying to pay your mortgage down faster. Here, we cover some of your options, and what you should consider.
Did you spend more than you could afford over the holidays? If so, right now you might be feeling like you’re buried in debt. This can be overwhelming, and probably not the way you wanted to start off your year. How on earth did this happen?
Spending too much over the holidays has become something of a tradition for a lot of people. In 2020 especially, we felt like we had to substitute the lack of gatherings for extra “stuff” to keep the season cheerful. The high of giving those amazing presents is probably wearing off as you lay those bills out on the table, and realize you’re deeply buried in debt.
If you’re wondering how you’re supposed to recover from this debt, this blog is for you. Here, we lay out a few strategies to help you diminish your holiday debt. You’ll be back on your feet in no time, so read on!
Check your budget
No one likes to think about their budgets. If you’re buried in debt, though, it might be time to face your budget. The last thing you want to do right now is to keep adding to your debt. Don’t spend more until you have more!
With that in mind, think about your expenses. What do you spend money on most often? If there’s room for cutting down on your spending in any area, do it. Of course, there are things you really won’t give up, and it’s best to acknowledge those now. Be honest with yourself if you know you’ll be unable to quit buying coffee every day, for instance. Try to focus your spending on a select number of things, and trim everywhere else.
You’ll gradually save money when you cut down on your extra spending. Make sure you check your account regularly to see how you’re progressing. If needed, you can readjust your budgeting and spending habits further.
You can also check out one of our previous posts on overspending and budgeting here to help you out.
Pay off high-interest debt
There’s some debate over what is considered “high interest” debt. For some, anything over 7% is high. Others don’t consider a rate high if it’s less than 10% or even 15%.
For tackling your debt, compare interest rates and determine what the highest rate is that you’re dealing with. This can be your baseline, and you can work towards not being buried in debt from here. Whatever your highest interest rates are, focus on paying those off first. Clearing high-interest rate payments is one of the best ways to get out of debt. High-interest rates have an alarmingly quick way of adding up. The sooner you pay off those high rates, the more money you’ll be saving.
Pay more than the minimum
If you can, always pay more than the minimum amount required on a credit card each month. Making the minimum payment is better than nothing and it keeps you on track, but if you’re already buried in debt, it’s not the most efficient method. Whatever balance you keep on your credit card will gather interest based on your rate. Of course, this means that the more money you haven’t paid off, the more interest you’ll have to pay. The more often you pay – and the higher the amount – the better. Frequent payments will help you pay off your debts quicker, and result in less interest for you to repay. This equals more money saved, which you can use towards reducing your debt.
Refinancing & debt consolidation
If you’re a homeowner, it might be a great time to refinance your home to consolidate your debt. Interest rates are low in most of Canada right now, so there’s a good chance you can get yourself a newer, better mortgage rate that will save you money. When you pay less for your mortgage, you increase your opportunity to save. This is a practical way to consolidate your debt if you’re a homeowner with the opportunity to take advantage of low-interest rates.
Debt consolidation sounds scary, but it doesn’t have to be! It simplifies the process of paying and keeping track of what you owe. Any payments you make will chip away at all your debt. Remember, debt consolidation doesn’t take your debt away for you. Of course, it’s still a viable option and we can help you decide if it’s right for you!
Talk to a professional
There are lots of options for dealing with debt, and a lot of opinions on what the best moves are. If you’re not familiar or comfortable with money and debt situations, we can help! We’re experienced brokers who want to assist you with your debt, and it’s our priority to do what’s best for you. Don’t stay buried in debt from the holidays.
If you’re thinking about refinancing to clear your debt, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at 902-482-2770, or contact us here.