Happy Sunday wonderful people! For today’s post I am reflecting on my top 3 money mistakes I made while repaying debt. Getting out of debt can be difficult, make it easier by avoiding these repayment mistakes. Here are the biggest money mistakes I made while repaying debt:
Misunderstanding how interest accrues for different types of debt
I was unaware that the interest rate on my student loan debts accrued differently from my auto loan. That is the student loan interest accrued daily, whereas the auto loan accrued monthly. Being unaware of this, I paid more than necessary on the auto loan. Considering that I had a very low interest rate loan, the amount is negligible. However, here is how to avoid this mistake. First off, learn how interest is accrued for every type of debt you have. That is, understand how it is calculated for your mortgage, credit card, auto loan, or student loan. Second, always request that your extra payments apply to your principal balance rather than the outstanding balance. Applying payments to principal saves you money.
Neglecting to learn about refinancing
I was unaware that federal student loans could be refinanced into private student loans at lower interest rates. Caution refinancing is different from consolidation. Consolidation appears to lower your interest rate, but it does not. Read the Pros and Cons of Debt Consolidation for more. I wish I explored my options for refinancing and I encourage you to check out your options.
Making payments on default accounts instead of negotiating a payoff
I was so fired up to become debt free that I encouraged a family member to do it too. However, that family member had several accounts in default and contacted the companies and set up a repayment plan. However, that was a huge missed opportunity to negotiate a settlement. If you are in default on any of your loans, be sure to negotiate a settlement.
Join the Debt Free Squad
I hope you will join the squad. Joining allows me to spread awareness about the benefits of living debt free to more people. Here is how you can join:
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If you are already apart of the squad, thank you!