What are some good tips on how to manage your debt?
Statistics from LightStream, an online consumer lender, show that outside of car, student, and mortgage loans, only one in four Americans carry close to $20,000 in debt. With that said, the holidays are soon approaching and Americans are ready to swipe away on various items without any thought of placing themselves into more debt.
Erin Lowry, who is known as the “Broke Millennial,” joined Yahoo Finance’s On the Move to give specific tips on how Americans can minimize and pay down their debt efficiently. Lowry said Americans need to create the perfect attack plan.
One “thing that you want to be doing is figuring out how to minimize the impact of the debt that you may already have,” she said, adding that one way to manage debt is to move it to a lower interest rate. “A lot of times people just don't want to face their numbers. It's that ostrich in the sand type situation. So you have to be writing down who owns the debt, how much debt you have, minimum monthly payments and interest rates to have that attack plan.”
A survey from LightStream found that 70% of Americans feel that debt is unfairly stigmatized. However, as some Americans think of ways to get over the debt hurdle, Lowry explains one option could be a debt consolidation loan.
“So let's say that you have $20,000 of credit card debt at 20.23% APR. That's crushing,” Lowry stated. “And if you consolidated that to a debt loan that then is at 5.95%, you're going to say $5,000 over the course of three years. And you have that one easy payment as opposed to trying to scramble and manage all of these other payments at once.”
People can also look into settlements, but it can have an impact on your credit score, said Lowry.
Tackling student loans
The biggest debt concern that many Americans face is student loans. Lowry explained that it’s important to get those debts onto a repayment plan. For those who have federal student loans, she explains that one option to consider would be income-driven repayment plans.
“You want to call up your lender proactively and have that conversation if you know you're not going to be able to make a payment and see if there's a way that they can work with you,” Lowry said. “You don't want to decimate your credit score in a particular month, especially if you have a high spend situation around the holidays.”
Ralston Ramsay is a producer for Yahoo Finance’s On the Move.