Have Different Types of Debt? 5 Ways to Pay It Back

You may have many types of debt, and while dealing with the burden may feel like a personal struggle, you’re not alone. The average American household has $132,529 in debt and pays $1,300 a year in interest on credit card debt, according to NerdWallet.

Paying down debt can feel especially overwhelming when it’s spread among many creditors. Adding to the stress is that there’s no simple solution. Your best strategy for lifting the load will depend on many individual variables, including the amount of the loan, budgeting discipline, credit score, kinds of debts and terms and conditions. Here are five options to consider for paying back debt.

1. Use a Balanced Approach

While it makes sense to be aggressive in paying down your high-interest debts, like credit cards, you could also tackle some of the smallest balances, as well, to pay those off and have a more tangible sense of achievement.

2. Use Refinancing for Mortgage Debt

Refinance your mortgage to lower your monthly payment if you find a rate that shaves a percentage point or two off your current one. Keep an eye on refinancing fees to ensure the new loan is worth the effort. A mortgage refinance calculator can help you with the decision.

3. Use an Income-Driven Plan for Student Loan Debt

Consider income-driven repayment plans for federal student loans you took out for yourself. They can reduce your monthly loan payments by basing them on your income and family size instead of on the amount you owe, according to the Department of Education. Making lower regular payments means you’ll likely pay more interest over time with income-driven plans than you would under the 10-year basic standard repayment plan.

4. Use a Zero-Interest Card for Credit Debt

Transfer credit card balances to a zero-interest card. It’s a particularly useful strategy if you can pay off the balance before the promotional rate ends and a higher annual percentage rate (APR) takes effect. One important thing to consider: You may need to pay a balance transfer fee for the opportunity, and that fee may cancel out the benefits of the move. If you take the step, it’s important to review the terms to understand which APR will apply for new purchases.

5. Use Consolidation for Multiple Debts

Research other ways to combine debt. A debt consolidation loan in the form of a home equity loan or personal loan, for instance, enables you to merge multiple debts with different interest rates into one monthly payment with a single, low interest rate. Some come with origination fees and may lengthen your payment term, and all require smart budgeting. Notably, with a home equity loan, you put your home at risk. A debt consolidation tool can help you determine if a debt consolidation loan is a good choice for you.

These are just some options available to reduce the weight of many types of debts, and you don’t need to work through the process alone. Your bank should have plenty of resources that can help you not only gain more control over debt, but also learn to alter your spending habits, too.

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