5 Mistakes People Make when Paying Off Debt

You're working hard to pay off your debt, but are you doing the right thing?

Unfortunately, many people make big mistakes that can cost them a lot of money. Whether it's paying only the minimum due or not exploring all of your options, you want to avoid the mistakes people make when paying off debt.

Paying Only the Minimum Payment

You're paying your bill each and every month, but don't seem to be getting anywhere. The reason may be that you're only paying the minimum amount due.

In most cases, the interest fees that are tacked on each month are almost as much as the minimum payment. In other words, you're barely touching the principal.

Always pay more than the minimum due on the debt you're currently tackling. You can continue to pay the minimum payment on all the rest of the debt until it's time to pay that debt off in full.

Continuing to Use Credit

You're never going to get out of debt if you continue to use credit. If you're serious about getting out of debt once and for all, you want to stop using your credit cards. That might mean cutting up your credit cards so you can't use them again (or putting them in a bag of water in the freezer so you have to wait for it to thaw before you can use your cards).

If you're relying on your credit cards to pay bills, you need to sit down and really look at your finances because you're living above your means. Redo your budget so that you don't have to reply on credit cards to make ends meet.

Not Having a Plan of Action

Another big mistake people make is to fail to have a plan of action. This means you need to create a budget, pick a payoff plan, and stick with both your budget and plan. For example, some people choose to pay off the highest interest accounts first, while others choose to pay off the smallest balance first.

Whatever plan you choose, stick with it rather than being all over the place and you'll be successful at paying off your debt.

Failing to Contact Creditors to Reduce Interest Rates

If your accounts are in good standing, contact the company about reducing your interest rates. Many people fail to do this and end up paying more than they have to.

Contact each creditor and explain that you've always made payments on time and would like to reduce your interest rate. You may need to speak with a manager to get the interest rate as low as possible.

Not Exploring All Their Options

There are several options when it comes to getting out of debt. You can choose to transfer all your balances to your lowest interest rate card while you work hard to pay extra on your debt each month. Another option is to get a personal loan to pay off all the debt.

Look at all your options to determine which is right for you and which will help you be successful. However, the key to success is not transferring your debt from card to card or to a person loan. You'll only be successful if you do the work to stay focused and pay extra money towards your debt each and every month.

You may think that all you need to do is make your payments on time, but there's so much more to it. Make sure you're not making these mistakes people make when paying off debt.