Even if you don't have a stack of credit card bills with high interest rates, you may have school loans, car loans or high-interest loans. There are ways to manage your debt so you can pay less in interest, minimize monthly payments and eventually eliminate these loans altogether. Consider these three ways to reduce your debt.
1. Look for lower interest rates
A lower interest rate allows for a higher portion of your payments to go towards paying off the principal of the loan, so you can pay off the debt faster. Here are a few ways to get a lower rate:
- Request a lowered interest rate from your credit card provider
- Open a lower interest credit card, and make a balance transfer
- Move balances off of cards with especially high interest rates, and onto cards that can minimize these charges
2. Consolidate debt with loans or lines of credit.
Not only will debt consolidation help you better organize your monthly payments, but it should also allow you to pay less in interest than all your previous rates combined. Here are just a few ways you can combine and manage your debt:
- Apply for a debt consolidation loan, and then pay just the single monthly payment on your new loan
- Open a line of credit rather than taking out another loan, then repay the line of credit as you use it
3. Refine your debt paying strategy.
Once you've consolidated your debts into as few loans or payments as possible, you may still have to prioritize the debts you can afford to pay first. There are two schools of thought on this.
Pay off your highest interest loans first
Some financial experts will advise you to tackle the highest-rate debt first because interest is accruing at a brisk pace. If the loan balances on your high-interest debts are within your reach to pay, this can be a good strategy. However, the debt with the highest interest rate may also be the largest loan or debt you have, meaning it will take longer to pay it off and make a dent in your overall debt load.
Pay smaller loans first
Eliminating several smaller loans and debts first may be a better solution. You'll reduce your overall debt load, and get the satisfaction of having some initial success.
CIBC has a borrowing solution for you.
CIBC Personal Loans and Lines of Credit enable you to borrow with flexibility at competitive interest rates. Talk to a CIBC advisor today at 1-866-525-8622. You can get your questions answered and learn about CIBC's lending products. Or, start your loan application online now.