3 Ways to bust debt before 2023

As we head into the back end of the year, debt can start to feel like a heavy burden. With personal loans on the rise, growing numbers of Australians owe money. 

If you’re looking to clear that debt before 2023 rolls around, we’re here to help you out with options for getting yourself debt-free. 

Why should I try to pay down my debt?

While a level of debt isn’t always a bad thing, owing money can do more than just cause stress. 

The greater your debt and the longer it lingers, the more it will impact your credit score. While this might not feel like a big deal right now, it will become a much bigger problem later on when you are trying to apply for future credit cards, home loans, or other loans. 

Debt can also snowball out of hand extremely quickly. What starts as one overdue credit card repayment (removing your interest-free days for the next month) will become even harder to pay off in full the following month, meaning the amount you have to pay interest on will continue to grow. 

Once you’ve lost control of one source of credit, it makes it very tempting to dip into others. Taking out loans, opening multiple credit cards and opting for Buy Now Pay Later on things you can’t afford to pay off will all just add on to existing debt.

Balance transfer credit cards

One way to focus on paying down debt is to switch over to a balance transfer credit card.

These cards will have you transfer over between 70% and 100% of the credit limit, paying very low interest on the balance for an introductory period (this can be between a few months and several years). This means you could end up paying off your debt without interest, if you manage to pay it off before this period finishes.

Just remember - after an introductory period, watch out for the revert rate. If you don’t end up paying off your debt while you’re in this low-rate period (sometimes even 0% interest), you might end up paying quite a lot on whatever balance remains. You may also have to pay a balance transfer fee to move your balance from one card to another.

These cards are also not for spenders, with new spending often costing a lot in interest - the focus here is on working down your credit card debt.

Refinance your home loan

If you own property, you may be able to bring down your debt by refinancing your home loan. 

Once you’ve been paying off your home loan for a while, your circumstances will change, and so will the home loans you are eligible for. You aren’t stuck with that same home loan you locked on to when you first found your property, so it might be time to look around and see if you can score some savings, which you can use to pay down debt elsewhere.

Look specifically at home loans offering better rates to those with lower LVR (loan to value ratio), as you will now have paid off some of your home’s value. You might also look to online lenders, which might be harder to navigate but can often reward you with serious savings.

This can be a great option for paying down debt as it doesn’t feel as much like having to give up your money, but rather finding a new source of income through which to fund your repayment.

Debt consolidation loans

Another option for eliminating debts is to bring them all together into a debt consolidation loan. Though taking out a new loan might feel more like adding debt than working to get rid of it, there’s method to the madness - we promise!

Debt consolidation loans work by bringing together the balances of all of your individual debts (credit cards, store laybys, loans, etc) and combining them into one loan to be paid off together. 

While technically this does not change the amount you owe, it can make paying back multiple debts a lot more manageable. You will have one payment schedule instead of multiple to juggle, and will amass interest on one total figure instead of on many smaller amounts.

These loans might not be for every situation. Work out how much you owe and then use our loan repayments calculator to figure out how much you can afford to pay in monthly or fortnightly instalments. This way, you can calculate a set period of time in which to pay off your debt - and wipe out a significant chunk of it before 2022 is over.

Looking to save some money to help pay down that debt before the year’s out? We’ve got 22 ways to save money in 2022. In the meantime, find our guide to debt consolidation.