A growing number of Americans are struggling to manage their finances, and few seem to realize how easy it is to reduce one critical part of a typical monthly budget. According to NerdWallet, the average U.S. household is paying a total of $6,658 per year in interest alone! Broken down, that amounts to $554 per month that Americans pay and get nothing in return. The good news is, even if it will take you years to pay off the principal of your debts, there are several easy ways to minimize your monthly interest payments.
Refinance your mortgage
Mortgages are such a large debt to take on that most people make sure to get the best interest rate at the time they take out their mortgage. However, interest rates change over time and even a 1.0% drop in interest rates came mean thousands of dollars saved on a six-figure mortgage. The Federal Reserve recently issued its first rate hike from historically-low levels since the Financial Crisis, and rates will likely continue to rise in coming years. If you haven’t taken the time to refinance your mortgage in recent years, now may be your last chance to take advantage of cyclically-low rates.
Improve your credit
Sometimes, something as simple as growing older or moving to a different zip code can allow you to qualify for lower interest rates on loans. However, improving your credit score is one sure-fire way to qualify for lower-rate loans. To boost your credit score, make sure to make payments on time and be mindful of your debt-to-credit ratio (the lower the better).
Consolidate and prioritize your debt payments
Credit card debt is usually the worst type of debt to carry in terms of interest rates. The average credit card rate is currently around 15%, much higher than mortgage, student loan or private loan rates. By taking out a private loan from an online lender like Prosper or Lending Club, you can pay off your high-rate credit card debt and replace it with a single lower-rate loan. Any debts that remain should be prioritized in terms of their interest rates, not by the size of the balance, and higher-rate debt should always be paid off first.
Take advantage of card promotions
What’s even better than paying lower interest rates? Paying no interest at all. To get some breathing room in the short-term, look for credit cards that offer extended interest-free promotions and no balance transfer fees. The Chase Slate card currently offers an introductory 0% APR for 15 months and no balance transfer fee for 60 days.
Life has plenty of expenses, but at least when you pay the electricity bill or do the grocery shopping, you are getting products or services in return. Money spent on interest is completely wasted, and yet Americans are still paying $554 per month in interest alone. The first step to eliminating your debt burden is to stop the bleeding from high interest rates. You might be surprised how far an extra $554 per month could go.
Disclaimer: The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the suitability of any Even Financial product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional. Any information or statistical data sourced by Even Financial through hyperlinks, from third-party websites, are provided for informational purposes only. While Even Financial finds these sources to be accurate, it does not endorse or guarantee any third-party content.
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