3 Tips on Paying Off Debt Efficiently

• Here are three tips on how you can pay off your debt efficiently:
• Consider using debt consolidation
• Figure out the best time to pay your debt
• Look into debt relief

Most people struggle with repaying debt, especially when they have a mental illness. The Mental Health Foundation’s insights on debt notes how half of all adults with a debt problem also live with poor mental health. Depression and anxiety often hinder the motivation to keep track of money and even lead to unwise decisions with spending. As shared in my previous post on paying off a £10,000 debt, mental health conditions can make it almost impossible to keep things balanced. It gets difficult for people to process many decisions and emotions regarding their work and passions, which can often worsen the resulting debt.

To combat these issues concerning debt, it’s important not only to invest in mental health recovery but also in financial literacy and management. You can handle your debt payment more effectively by taking steps to address any personal problems.

Here are three tips on how you can pay off your debt efficiently:

Consider using debt consolidation

Having multiple high-interest debts can be overwhelming to deal with. Rather than missing your payments and incurring more interest, you can use debt consolidation to combine several loans or liabilities into a single payment that is easier to keep track of. This personal loan lets you streamline your finances and potentially avoid higher interest rates from individual payment terms. Since this is still a loan, the interest rates depend on your credit history and payment terms — ranging from 6% to 30%. It’s essential that you first compare your options before availing of debt consolidation for its convenience.

Figure out the best time to pay your debt

Many assume paying off debt as early as possible is the best action. This is a reasonable assumption, but some lenders actually charge fees when you pay them early. Of course, there are some scenarios where it’s better to pay your debt at once.

Sound Dollar recommends paying off debt early if it’s causing you financial stress. Sometimes, emotions triumph over the math, so if paying off your debt helps you sleep better at night, an early payoff would be ideal. When paying early, it’s important to double-check your loan contract for any prepayment penalties. In the UK, mortgage loan penalties typically range from 1% and 5% of your outstanding mortgage. While it may not seem much, 1% on a £200,000 loan can easily cost you £2,000. Some lenders offer reduced prepayment penalties over time, so you may want to factor that into your debt repayment schedule.

Look into debt relief

Unlike debt consolidation, which still requires you to make full loan payments, debt settlement is a form of debt relief where you renegotiate with your creditors. In the UK, there are plenty of options where you can get debt relief — through a Debt Management Plan, Individual Voluntary Arrangement, or in the case of extreme
financial difficulties, a Debt Relief Order or Bankruptcy Order. If you live in England or Wales, you can get temporary debt respite through the ‘Breathing Space’ scheme. Through this protection, creditors aren’t allowed to contact you about your payments and charge you an additional interest on your debt for up to 60 days. This can be especially useful for people suffering from mental health crises, as you will be granted an additional 30 days of protection to help you manage your finances. You can seek out your debt adviser to find debt solutions and find time to pay for other essential bills that cannot otherwise qualify for ‘Breathing Space’.