Most millennials struggle with paying off their student loan debt. In fact, 15.1 million millennials owe a staggering amount of $497.6 billion dollars in student loan debt. But, even if it feels at times that it’s impossible to pay off your student loan debt, it’s certainly doable when you’re armed with the right information and resources. That said, below you will find three great tips that will help you to pay off your loans.
Debt Repayments Methods
Some popular debt repayment methods are the debt snowflake method, debt avalanche method, and debt snowball method. However, for these methods to work, you need to have a good budget where you’ve included information about your monthly payments towards each loan.
In order to use the debt snowflake method, you need to make a list of your loans ordered from smallest to the largest. Take into account only the overall balance of the debt, not the interest rate.
With this method you’ll have to save a small amount of money on a daily basis and use what you save to make small payments, or “snowflakes”, on the lowest debt on your list. The main advantage of this method is that you will be able to quickly see some progress, and it’s an easy strategy to follow and implement.
The second method we’ll discuss is the debt snowball strategy. With the debt snowball method, again you will need to make a list of all of your loans from smallest to largest. You then make minimum payments on all your loans, but you’ll make a larger payment on your lowest debt. After you have paid off the smallest debt, you’ll repeat the process for the next loan on the list.
The last method is the debt avalanche method. For this, you will list your loans based on their interest rate. The number one position on your list is the debt with the highest interest rate, and the last position is the debt with the lowest interest rate. After you’ve paid the minimum balance on all the other debts, you make a bigger payment on the loan with the highest interest rate. Keep in mind that there may be loans that you can refinance and reduce the interest rate to help save you money. There are refinancing companies for student loans that can help you evaluate your options and find what fits you. With lower interest rates you are also able to pay those debts off faster.
Create a Budget
It doesn’t matter which strategy you chose to follow as long as you have a budget that works for your financial situation. It’s only the first step towards a wealthy lifestyle, so make sure to do your research and create the best budget for you. Generally, you need to include your flexible expenses, fixed expenses, income, savings, and monthly payments of your loans. Also, you can start by writing down your daily expenses in order to gain a better understating of your costs.
If you feel that you can use some extra cash to reach your financial goals, then you can find a part-time job or start freelancing. Just make sure you have a good portfolio and CV because there’s a lot of competition in certain sectors, but there are a lot of opportunities. So, based on your free time, you can find projects or a part-time job that will become another source of income that will help you to pay off your debts faster.