5 Ways to Reduce Debt in 2023

The start of a new year often coincides with people setting new resolutions, and for many Americans, that includes cutting debt.

Doing so not only relieves the obligation but can also free you up to use your money elsewhere. Instead of paying interest on credit card debt each month, for example, if you cut off that debt, you can put more money toward investments, grants, and savings for a rainy day.

You can start consolidating your debt into more manageable debt now.

5 Ways to Reduce Debt in 2023

How do you go from setting debt reduction or elimination goals to actually accomplishing those New Year’s resolutions? There are many ways to do this, which may vary depending on your credit situation and financial preferences. Some of the more popular methods include the following:

Debt consolidation

As mentioned above, to reduce debt, you may find that consolidating your liabilities helps, such as with a Debt Consolidation Loans. Not only can it make it easier to stay on top of your debt by managing less liability at once, but depending on the terms of a debt consolidation loan, it can help you save money on interest payments.

If you can pay less interest, you can reduce total lifetime payments and potentially finish paying off the loan sooner.

You can get a free savings estimate from National Debt Relief by clicking here.

Review insurance coverage

Another way to reduce debt is to look for savings opportunities, which free up cash to pay off debt faster. One way you may be able to save money without making any major sacrifices is by reviewing your insurance policy.

You may find that you have more coverage than you need, for example, or you may be able to work out better terms with your insurers. Perhaps you drive less than when you first got auto insurance, in which case you may qualify for lower premiums. Or maybe there is an opportunity to bundle policies with the same insurance provider to save money. You may also have the wrong life insurance policy, which can cause you to pay more than you need to.

Get a free price estimate from Ladder here to compare what you’re paying now.

Improve your credit score

Racking up debt can sometimes hurt you Credit scoreBut if you work It’s an improvement, that could be less debt. For example, with a higher credit score, you may qualify for better terms on a debt consolidation loan, thereby helping you lower interest payments so you can pay off your loan principal faster.

Using credit monitoring services can help you find out how your credit score looks and find ways to improve your credit score.

Regularly paying on time is usually a very important issue. But you may find more personalized recommendations depending on your situation, such as lowering your credit utilization rate, such as not putting as much on your credit cards each month.

Get your Experian credit report and FICO score to see how you want a lender to view you.

Refinance your mortgage

If your mortgage has a high interest rate, you may be able to reduce the debt By refinancing. If you can get a lower interest rate, you may end up paying less over the course of the loan, although this depends on the interest savings outweighing the initial refinancing cost.

Even if you can’t refinance at a much lower interest rate or come out ahead after refinancing costs, you can benefit from refinancing in other ways, such as when it helps you eliminate Private Mortgage Insurance (PMI).

Generally, you can deduct PMI if you have 20% equity in your home, but that value may be based on your original purchase price with your current lender.

So, if your home goes up in value, you can already have over 20% home equity and then refinance to get rid of PMI costs. Then, you can pay off your mortgage faster or use the savings any way you want.

Answer a few quick questions here to find out if mortgage refinancing is right for you.

Student loan refinancing

if you have Student loan debt With higher interest rates, you may also be able to reduce your debt by refinancing.

Keep in mind, though, that if you refinance your public student loans with a private loan, you may lose some government benefits, such as potential loan forgiveness or a grace period to repay the loan. But if you already have private student loan debt, you may be able to lower your monthly payments if you can get a better interest rate.

You can easily check which student loan refinancing rates you qualify for here.

Bottom line

Taking this approach to debt reduction can help you save money in the long run and relieve stress by reducing debt. The best ways to reduce debt in 2023 and beyond can vary based on how much debt you have and who your lenders are. In general, however, such steps can help you get your debt under control.

And because you save money on interest payments and eventually pay off your debt, you can often focus more on meeting other financial goals, such as Saving for retirement Or help your kids avoid their own student loan debt.