Tips for Managing Debt Effectively
Repaying your debt can often feel challenging. That’s why making a plan to manage your payments and balances can help. Take a look at these tips and discover some small steps you can take today that may make managing your debt easier.
I like this quote from Wells Fargo and found it's relevant to Fina users. So here are expanded tips for managing debt effectively, along with how Fina can help you in each step.
- ⏰ Always pay on time
Payment history makes up 35% of your credit score. If you’ve missed a payment, pay as soon possible — it makes a difference. Credit reports will track if you are 30, 60, or 90 days late on payments.
Fina will learn your payment history and help you to remind you of the due date. No matter it is a credit card account or a loan account. You can also set up a reminder in Fina to alert you before the due date, so you can make sure to pay on time.
To learn this feature, check out Fina Radar for more details.
- 💳 Monitor your credit regularly
Review your credit reports regularly to make sure they are accurate, and to look for areas where you can improve. Order yours free at annualcreditreport.com. This is recommened by the Federal Trade Commission (FTC). You can also check your credit score for free through your bank or credit card company, or through a third-party service. Don’t worry, requesting your score or reports in these ways won’t affect your credit score.
Currently, Fina does not support credit score tracking, but it is one of the items in our backlog.
- 💸 Pay more than the minimum
Always try to pay more than what’s due. This helps to pay down debt faster, save on interest expense and may improve your credit score.
The best way to ensure you can pay more than the minimum is to set up a budget. You can track how much remaining savings you have after your monthly expenses. You can prioritize allocating those extra funds to pay down your debt rather than spending it on non-essential items.
- 📊 Know your limits
Being close to or maxing out your credit limits may negatively impact your credit score. It’s a good idea to keep your balance on revolving lines under 30% of your limit.
Do you know how much credit you have available? Pay attention to the Fina acocunt balance, for credit card accounts, it not only shows the current balance, but also the available limit you can spend, a simple glance can help you to know if you are approaching the 30% limit.
If you have multiple credit lines, Fina plans to support you enter more information like interest rate, cashback rate, points earning rate, payment due date, etc. With this info, Fina will automatically figure out an optimal payment plan that not only saves your interests but also maximize your credit points to be earned.
- 🔣 Know your debt-to-income (DTI) ratio
Lenders look at the amount of debt you have compared to your monthly income when extending new credit, so it’s a good idea to keep your DTI ratio under 35%.
It is very easy to put up a Fina block in a page that calculate your DTI ratio, just pull two metrics together:
- Total monthly debt payments
- Total monthly income
Then use the formula to calculate the DTI ratio:
DTI = Total monthly debt payments / Total monthly income
- 💰 Take on new debt only when needed
Apply for and open new credit accounts only if you need them. Having too many accounts with balances may lower your credit score and may become difficult to manage.
This is life principle, not only for debt management.
- 💹 Qualify for lower rates
See if you qualify for lower rates on your current debts, especially if your credit has improved or if interest rates have dropped since you originally applied. Wells Fargo customers can use the Check my rate tool to get rate and payment estimates, with no negative impact to their credit score.
Use Fina to track your debt and payment history, and you can easily see if your credit score has improved. Consistency is key, so make sure to check your credit score regularly. Fina will also onboard intelligent email reminders to help you on tack.
- 📎 Think before closing accounts
Closing credit card accounts may lower your available credit and could hurt your credit score in the short term. Consider keeping accounts open if they have a good payment history and a low or zero balance.
Fina will help you to track your credit card accounts, and you can evaluate if keeping a credit card is a better choice.
- 🏦 Build an emergency fund
Having funds set aside in a savings account may help you to avoid using credit cards for unexpected expenses.
Fina has a built-in emergency fund block, you should leverage it to build and track that for finance safety. Find more templates from Fina template gallery to get you started.
Summary
Managing debt effectively is a crucial aspect of maintaining financial health. By following these tips and utilizing tools like Fina, you can take control of your debt and work towards a more secure financial future. Remember, the key to successful debt management is consistency and awareness. Start today, and your future self will thank you.