Happy New Year from Borrowell! Is paying off your debt this year one of your New Year's resolutions? You may not be surprised to know you’re not alone.
We wanted to give our users a few tips and tricks to help them stick to their New Year's resolutions of tackling their debt for the year 2021. If you want to make your financial resolutions a reality for 2021, read on…1. Pay off high-interest debt with a low-interest personal loan
Did you know the typical credit card has an interest rate of 19.99%? If you fall behind on payments, it can feel like you’re quickly sinking into compounded interest. Even more worrisome is that a credit card issuer can increase your interest rate by as much as 29.99% if you happen to fall behind. The solution? Consolidate your debts with a low-interest loan. Not only will you save on interest, but you’ll also only have one lump sum payment to worry about repaying, rather than many smaller ones. Double win!
If you have a credit score of 660 or above, you could qualify for a low-interest personal loan to pay off your credit cards and save on interest. Rates start at 5.99% for loans ranging from $1,000-$35,000. Another benefit of a loan is that the rates are fixed, so you always know exactly how much you’ll be paying, and when your loan will be paid off, which can help immensely with budgeting, a topic we cover in the next section.2. Create a realistic budget to help you get back on track
We often reference budgets a lot on The Well. But we do so because we know that budgets work! The first step to creating a budget is to take an honest look at your finances.
A good technique to budgeting is to start with baby-steps. If you start developing seemingly small, but positive, financial habits, you’ll notice a big difference in the long term. Plus, by starting small, you are less likely to become overwhelmed and end up feeling discouraged if you don’t succeed. Take a look at your monthly spending habits and what you can change. For example, how many times a week do you buy your lunch or eat out? Could you instead set some time aside each week and prepare some meals for the week to save money on take out? How about your morning coffee or tea? Could you prepare them at home and enjoy it during your commute instead? Little steps like these can end up having a huge impact in the long run. 3. Get a low-interest credit card
Low-interest credit cards are a great way to instantly reduce the amount of interest you pay. As an added incentive, most-low interest credit cards allow you to do a balance transfer so you’ll start paying that lower rate on any existing debt.
When used responsibly, credit cards are a great way to access and manage your credit, and can also give you an opportunity to improve your credit score as long as you keep your utilization down and make consistent monthly payments that are more than just the minimum.
Because many cards have a different rate of return for different spending categories, it's best to weigh your options and do your research to choose a card that matches your spending habits. See all the credit cards you could qualify for. 4. Monitor and understand your credit score
Monitoring and understanding your credit score and credit report is one of the best ways to take control of your finances. Your credit score is an important indicator of your overall financial health and having a good credit score can help you save money. Your credit score is determined by a number of factors such as your credit utilization, your credit history, the different types of credit you have access to, and the frequency of different credit inquiries (i.e. how much and how frequently you apply to, and receive, additional credit).
Your credit score also plays a big role in whether you’ll be approved for a personal loan, car loan, or mortgage. Checking your credit score through Borrowell is a soft check that won’t impact your score.5. Create an emergency fund
You’ve probably heard this advice before, but we can’t stress the importance of having an emergency fund enough. Life is uncertain and you just never know what could happen. An emergency fund can protect you from unforeseen circumstances, such as job loss or an emergency home repair. Once you feel a bit more secure with your finances, you can look into starting to save a bit for investing to grow your savings. A general rule of thumb is to have three months worth of your salary saved for an emergency fund.
From all of us at Borrowell, we wish you a happy and healthy new year and we hope that your New Year’s resolutions become a reality. Here’s to a happy and financially responsible 2021!