Click below to hear Ed share debt reduction strategies with Cisco Cotto of the WBBM Noon Business Hour.
Tackling personal debt is a reality for most people. Debt can be overwhelming, and creating a strategy to pay your various debt burdens is a good first step in regaining your financial footing and providing some welcomed psychological relief.
Make a List
Make a list of who you owe, how much you owe, and interest charges. A popular debt reduction strategy is the “debt-snowball method” (https://en.wikipedia.org/wiki/Debt-snowball_method) which is based on prioritizing your debt by the outstanding balance rather than by interest rate.
There have been many debt relief programs instituted during the global pandemic. Rethink traditional debt payment strategies to consider the various programs to ensure you are taking advantage of the most generous options.
The student loan relief measures for federally backed loans have been extended through September 20, 2021. The relief measures include suspension of payments, 0% interest rate, and ceasing collections on defaulted loans.
There are discussions in Congress to provide student loan debt relief of up to $10,000. Should you have student loans of more than $10,000, use the 0% interest environment to accelerate paying down your debt as 100% of your payment is targeted directly toward principal reduction.
Forbearance is not forgiveness – interest is most likely accruing on the principal balance of your mortgage. Once you can resume payments, work closely with your lender to gauge the most economical way of addressing the higher balance. Lenders generally offer borrowers the ability to make higher monthly payments or add more monthly payments on the loan’s back end.
If you are behind on your auto loan, be wary of repossession. Work with your lender to see if there are any relief options available.
If you are currently experiencing financial hardship or anticipate financial challenges in the short-tun, be proactive and contact your lenders to discuss any programs they may offer to provide temporary relief.
There is over $975 billion owed through revolving credit cards which often incur very high-interest rates. Develop a payment strategy to pay down the highest interest cards first. Be very careful of canceling credit cards as you may suffer a lower FICO score due to increased debt utilization or loss of credit history.
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This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.