2 in 3 Americans Worry About Their Debt Frequently. Here’s What to Do if You’re in That Boat

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Concerned about debt? Read on for steps you can take to whittle it down. 

It’s not uncommon for most people to carry some sort of debt. Many people have to finance a home or car purchase, for example, because they don’t have the funds to cover such large expenses in full.

But while it’s one thing to carry a mortgage or auto loan, it’s another thing to juggle multiple credit card and loan balances. So if you’re in the latter category, you may be fairly stressed about it.

You’re not alone.

Among consumers with debt, about two in three worry about paying debt “very frequently” or “often,” according to a recent survey by First Tech Federal Credit Union. But living your life plagued by debt-related worries isn’t great for your mental health, so it’s important to do what you can to break that cycle. You have a couple of options.

1. Tackle your debts from highest interest rate to lowest

The sooner you pay off your debt, or at least make notable progress on it, the more your outlook might improve. One approach you may want to take is to tackle your debts by order of highest interest rate to lowest, since debts with higher interest are costing you more to carry. This is called the debt avalanche method.

So, let’s say you owe $500 on a credit card charging 12% interest and another $2,500 on a credit card charging 17% interest. You may be inclined to pay off the $500 balance first, since it’s smaller. But financially speaking, it actually makes sense to pay off some of that $2,500 balance first because it’s costing you more.

Consolidate your debt into a single loan

Part of the problem of carrying credit card debt is that the interest rate on your card can be variable. This means it can climb over time and make your balances harder to pay off.

Another good tactic to employ in the course of paying off your debt is to consolidate your various balances into a single loan. You could also do a balance transfer, especially if you’re eligible for a 0% introductory rate on it. But that 0% interest rate will only remain in effect for a limited period, and once it ends, the interest rate on your balance could skyrocket.

A personal loan may be a safer bet because you’ll get to lock in a fixed interest rate on your debt from the start. As such, your monthly payments on that loan will be set in stone.

If you own a home, you could also look at consolidating your debt via a home equity loan. It’s a good idea to compare interest rates between that and a personal loan to see which is more favorable.

It’s important to note that falling behind on home equity loan payments could put you at risk of losing your home. So you may want to stick to a personal loan for that reason alone.

Bottom line

Carrying debt can be stressful no matter how much you have. If you spend a lot of your waking hours worrying about your debt, make a plan for paying it off for good, whether by tackling your balances in order of most interest to least or via debt consolidation. You may not end up debt-free in six months or a year. But if you keep at it, you should eventually reach the point where you’re no longer burdened with owing money.

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