Many consumers, including gig workers, borrow money to buy a house or a car. But these and other loans include interest charges that affect your budget and credit score. That’s why it’s a good idea to prioritize and commit to paying off loans. Consider using three strategies to get out of debt and improve your financial future.
Make a list of all your loans. Include details like the interest rates, monthly payments and payoff totals. You can then prioritize and pay them off using the snowball or avalanche method.
Snowball – Pay off the loan with the lowest balance first, then apply that payment amount to the next debt on your list. With this method, you’ll see consistent progress, which can increase your motivation and momentum to keep paying off loans.
Avalanche – Pay off the loan with the highest interest rate first and continue until all your loans are repaid. This strategy helps you get out of debt quickly, but progress can be slow. For extra motivation, track the amount of interest you save.
The repayment method you choose depends on your unique situation. While both options work to reduce your debt, the key is to pick a plan that fits your psychological needs and supports your goals.
Found money is surprise cash. While found money isn’t reliable income, you can use it to reduce your loan balances.
Negotiation is one source of found money. Ask lenders to reduce your interest rate or even your account balance.
You may also barter for services. Exchange pet sitting for meals or perform home repairs for reduced rent. Remember to apply the money you save on meals or rent toward your loans.
Other examples of found money include raises, tax refunds, rental income, inheritances, and yard sale earnings. Also, get creative and try these ideas.
- Rent a spare room or parking space during the tourist season.
- Shovel snow for neighbors in the winter.
- Collect $5 or $10 bills and coins.
- Sell unused gift cards, clothing or gadgets.
- Walk pets during the day.
- Enroll in autopay or paperless billing to reduce interest rates.
- Refinance to a lower interest rate.
Your income as a gig worker may be irregular, but you probably can make small tweaks to your loan repayment amounts. By paying extra on your loan principal, you could save big bucks in the long run. Here are a few suggestions.
- Round up your payments. Add a few extra dollars to each payment check, and note that you wish to apply the extra money to the principal. This strategy for paying off loans allows you to customize payment amounts and get out of debt faster.
- Make extra payments. Include an extra payment or two in your monthly budget. Even if you can’t afford to pay double the minimum amount due, any extra payments you can afford will reduce your debt.
- Pay biweekly. Split your monthly payment amount in half, and pay that amount every two weeks. This strategy reduces interest charges and your overall loan balances.
When prioritizing and paying off loans, stay committed. Try one or more of these three strategies, and you’ll see results as you invest in your financial future.
About the Author: Jennifer Turner writes web content for a variety of clients. As a gig worker, she understands the rewards and challenges of the industry, which is why she prioritizes daily self-care and follows a budget. You can find her at WriterAccess.