3. Flatten debt

Take Control of your Money

Step 3, flatten debt
Step 3, flatten debt
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Tackling debt isn’t as scary as it might seem. Once you have a plan in place to start repaying it, paying down even large loans can be a simple matter of time and patience.

How to figure out how much debt you’re in

If you’ve been hiding from debt, now is the time to face your fears and get rid of the ugly financial monster hiding in your closet.

The first step is to calculate how much debt you have and how much it’s costing you in regular payments and fees. Add up all your regular payments and frequencies, including how much you pay that you don’t need (interest charges on borrowed money and card fees) to prepare your repayment strategy.

Try using our debt consolidation calculator to total up your debt.

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Flatten debt

How to pay off debt

Once you’ve calculated how much debt you have and how much it’s costing you, you can create a plan to pay it all off.

Look in particular at high-cost debt like credit cards or buy-now-pay-later purchases, and any personal loans or vehicle loans you might have that are regularly reducing your available bank balance.

The more a debt is costing you, the more you benefit from paying it down. This means it may be worth prioritising the debts with the highest interest rates and/or fees before you tackle other lower-cost debts, even if they are for larger amounts.

Low interest credit card

Credit card debt

Credit cards each have their own interest rate. So, if you can’t pay off the balance in the short term, try and find a lower-cost credit card that you can transfer your available balance to. Then lock the new card away while you repay it.

Here are some other tips to help you on this journey.

  • Pay off your highest-interest balance first If you have more than one credit card, you will generally save more money in interest by paying down the card with the highest interest rate first.
  • Negotiate a lower rate with your credit company Not everyone knows that you can call your credit company and request a better credit arrangement. At worst, you’ll know to look elsewhere for a better deal. But at best, you might get a lower interest rate to help repay your debt faster.
  • Get support if you need it If you're struggling to manage your debt, ask to speak to your credit card company's financial hardship department. You could also consider a phone call with a financial counsellor at the National Debt Helpline on 1800 007 007.

Streamline your payment dates

A credit card due date that doesn’t align with when you get paid can make budgeting and balancing your finances more difficult.

Choosing a payment date that works best for you and your current employment payments could help you pay off your debt fast and ensure you aren’t charged for late or missed payments.

Think about when you get paid and the times of the month you have the most cash available in your account. Then consider setting a repayment to line up with that.

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The 'hidden $100 method'

If you really want to pay off your debts as fast as possible, you’ll want to discover ways you can streamline your payments and life-hack your way to becoming debt-free.

One of the simplest ways to do this is by using the Hidden $100 Method. Here's how it works.

  • You currently make monthly payments of $100
  • You change your payments to weekly payments of $25
  • You feel like you’re paying the same amount, but...
  • At the end of the year, you’ll have repaid $1,300 in weekly payments as opposed to $1,200 if you were paying monthly.

This technique might seem simple, but it works.

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Consolidate debt into a single payment

You can do this in a few ways, but the most popular techniques are changing your existing repayment dates to all fall on the same day or consolidating your existing debts into a single loan with a single repayment date and amount.

You can consolidate debt into a personal loan or by refinancing your home loan.

Your aim here is to reduce your debt as quickly as possible while avoiding taking on any additional debt or increasing any of the charges attached to your existing payments.

Once you have a payment strategy in place, you might find you have additional money available from paying fewer fees on your debts, which can be directed into your emergency fund or used to make additional payments and reduce your debt even faster.

Try our free budget planner to help get a handle on your debts.

How do bad credit debt consolidation loans work

Pros and cons of debt consolidation loans

Debt consolidation loans can help you take control of separate debts and make them easier to repay. Ultimately, the right debt consolidation loan can also save you money.

Debt consolidation can have its downsides too. For example, applying for a new loan and being declined could negatively impact your credit score and make it harder to get finance in the future.

These loans may have upfront or ongoing fees that may look attractive on paper but in reality, cost you much the same (or more) than you were previously paying.

Consolidating debt in to loan with a longer term can be appealing as it could mean lower regular repayments, but the risk is you end up paying more in interest overall.

Only choose a debt consolidation loan when you have weighed up your options and are sure it will save you money overall.


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Written by

Helen Baker

Financial Expert

Helen Baker

Reviewed by

Sean Callery Editor Money.com.au


Sean Callery

Important information: Any advice or information on this site is of a general nature only and has not taken into account your personal objectives, financial situation and needs. Because of that, before acting on the advice, you should consider its appropriateness to you, having regard to your personal objectives, financial situation, and needs. Helen Baker is an Authorised Representative(s) of Godfrey Pembroke Group Pty Ltd ABN 38 078 629 973, AFSL number 245451, an Australian Financial Services Licensee, with offices at The Bond, Level 3, 30 Hickson Road, Millers Point NSW 2000.