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How to Pay Down Debt: 6 Tips (Pt. 2)
Resuming How to Pay Down Debt: 6 Tips (Pt. 1), here, we will reveal some more essential things to keep in mind as you focus on reducing and eliminating your debt obligations.
How to Pay Down Debt: More Essential Tips
Tip 3 – Pay more than the monthly minimum on at least one debt.
This is a crucial tip to remember if you truly want to pay down your debt. The reason is that, if you only end up paying the minimum monthly payments on all of your debts:
- You’ll never end up making any real headway in paying down the principle (as the minimum monthly payments tend to only cover accumulated interest).
- You put yourself in a holding pattern, simply treading water with your debt and never really getting anywhere in terms of paying it down.
So, once your debts have been prioritized:
- Choose at least one to put more than the minimum monthly payment towards until that debt is paid off.
- Consider putting any lump-sum payments you may get – like bonus checks or tax refunds – towards paying down your highest-priority debts.
Tip 4 – Keep a close watch on your credit report.
As you work to pay down debt, one thing that you may not be as focused on can be your credit report and/or credit score. However, paying close attention to these things as you diligently pay down debt is important to:
- Staying informed about the state of your debt and the progress you are making in paying it down.
- Knowing when creditors and/or credit reporting bureaus may have made mistakes regarding your debt. Such mistakes (like erroneous “missed or late payment” marks or even the wrong debt amounts) can end up impacting your credit score, and they need to be fixed if you really want to achieve a better financial situation.
- Immediately identifying when you may have been the victim of identity theft.
Here, we also want to note that:
- You are legally entitled to one free copy of your credit report every 12 months from each of the three major credit reporting bureaus – so take advantage of this and request it.
- If you do notice mistakes on your credit report, contact the bureau and creditor associated with the erroneous info to find out what you need to do next to contest the info and get it corrected.
We’ll point out some final tips regarding how to pay down debt in the conclusion to this blog series in part 3.
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