Written by Jenna Trollope
Alright, I will give you this one. We live in a society that allows us to incur massive amounts of debt before we are legally allowed to drink south of the border.
Many of us will graduate school with a sheet of paper that costs tens of thousands of dollars … and that is before we switched programs or continued with post-graduate studies. Once you are out of school, you are on your own to figure out how to pay down all your student loans while they continue to accrue interest.
Good luck with that! If only schools had mandatory financial literacy courses …
In all seriousness, please do not start incurring unnecessary debt. You may have known that before, but someone out there needs to hear that.
For everyone else, you need to figure out what debt you have. Start by learning the terms of your loan agreement, meaning what are the rules of your contract and what is allowed.
What is your interest rate and how is it calculated?
What is your current payment plan?
Are you allowed to pay more to reduce the amount of interest?
Will the financial institution charge you a penalty to pay it off early?
Educate yourself and read the fine print.
Once you have established those figures, it’s time to make a plan. After your current expenses, how much can you afford to pay down each month? Keep in mind, it is important to pay down debt with a higher interest rate first because you are paying more to borrow that money.
You can speak to your financial institution about refinancing your money. With a stable income and a better credit score, you may be able to negotiate a better rate for your outstanding debt. It will not always be an option, but it would be ideal to consolidate your debt into one payment with a lower interest rate.
What lessons did you have to learn the hard way when paying down debt? What worked best for you? We would love to hear about your best tips and tricks.