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Slim Down Your Debt

Dec. 30, 2015
Personal Finance
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As the new year begins, set yourself up for an amazing 2016. Whether you’ve got student loans, a car loan or another large debt — and really, who doesn’t have at least one of those? — we’ve got tips to help you cut down what you owe this year. (We’ve got you covered on credit card debt, too.)

So, what level of financial fitness have you achieved when it comes large debts?

barbell3xLevel 1: There’s a
fad diet for debt, right?

Getting your debt in shape is a lot like getting your body in shape: You’ve got to decide which way you want to shed the pounds (or, in this case, the debt). Understanding your options — and your starting point — is key to making the right choices. Here’s how to slim down your debt.

  • Make sure you know the terms for your current loans, including minimum payments, interest rate, timeline, whom you owe it to and how much you owe overall. Need a hand keeping track? Make a simple spreadsheet, or try a budgeting app.
  • Look at your credit score. If it’s high, you’ll have an easier time qualifying for refinancing. If it’s not so high, work on raising it this year. 
  • If you owe on student loans, find out whether you’re eligible for federal loan forgiveness. You should also know if you’re in good standing on your repayment plan, so you’ll be able to pay off your debt and eat more than instant ramen.

There’s truth to the saying that knowledge is power. Once you know what your current debts are costing you, deciding what to do next is much simpler.


Level 2: Ready to shake it off

We can’t all be business geniuses like T-Swift, but with the right tools you can shake off the stress from your debt. Here are some tips to get you started if you’re dealing with student loan debt:

Have a car payment that’s weighing you down, or need to find an affordable loan to get some wheels? We have you covered:

  • Check out this guide on car loan interest rates.
  • You don’t have to stick with a high-interest car loan that drains your bank account each month. Find out how to refinance.

Just like with credit card debt, you want to make a plan to pay off your other debts quickly. But a quick timeline isn’t always possible. Sometimes the best you can do is minimize the debt you’ve got by refinancing.


Level 3: You’re tapped into the Force

All right, you can’t use any Jedi mind tricks to get debt agencies to give you a lower interest rate, but you can set yourself up for the best rates possible on future debt, like a mortgage or car loan.

You’ve been awesome at minimizing the debts you have; thinking about future debts will take you to pro level. Because loan terms can be influenced by your personal situation (like your credit score or net worth), focusing on improving those can only help.

So, are you ready to get financially fit?

Tackling your debt and slimming down are both tough. Good thing you’ve got NerdWallet on your side to help get your debt in shape. (Sorry, you’re on your own for getting a fitter figure.)

Heather Yamada-Hosley is a content strategist at NerdWallet, a personal finance website. Email: [email protected]. Twitter: @Curious_Heather.

Top image via Shutterstock; barbells via 530 Media Lab.