We will often recommend ordering your debt in terms of cost with the highest at the top and to pay off high interest debts first. As long as the math makes sense, it’s the cheapest way to get out of debt. So, let’s expand on that a little with some practical ways to pay off those debts.
Our Woodstock auto loan team takes it from here.
Know where you are
First, we’ll start where we usually do with these pieces. By making a budget. Income in one column, outgoings in another and debt in the third. Order your debt by the interest rate you’re paying so the most expensive is at the top.
If the amounts are all over the place, use a calculator to figure out which debt is the most expensive and place that top.
Once you know your situation, we can get on with addressing it.
Make some savings to Pay Off High Interest Debts First
We all have areas of our lives where we can make savings when we need to. If you’re carrying debt, now is when you need to. Reduce spending by as much as you can sustain and put all of that towards paying off that debt.
Be mindful of cutting too far though. Yes, you’ll pay off more but you may find it much more difficult to sustain the effort over the longer term. Find a level where you’ll be comfortable for a few months until you have some paid off.
If you have multiple debts with multiple rates, you could consider a consolidation loan. One single loan that can pay off everything else at once leaving you a single payment each month. It can make life much more manageable and can make sense in some situations.
You can use an auto loan to consolidate debt. As long as you have enough equity in the car, you can borrow up to its current value and pay all your other debts off with the cash you raise.
Our Woodstock auto loans team deal a lot with these and they can work.
Take an auto loan payment holiday
Taking an auto loan payment holiday means taking between 3-6 months off from your loan. That time will be added to the end of the loan term so you’re not missing any payments or getting anything for free.
Payment holidays can work for some people in temporary situations. If you know you can use those loan payments to pay off high interest debts first, it may be a viable way to get out in front of everything.
Talk to your lender about auto loan payment holidays if you think you might benefit from one.
Get a side job
We appreciate that asking you to get a second job is easier said than done but we have known customers get out of debt this way. Use anything you earn in your side hustle purely to pay off debt and you will keep motivated to work.
It will be tough and likely require sacrifice but it’s also a viable way to pay off debt faster than you otherwise would.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!