Tips for Getting Out of Debt from the Pros at NASA Federal

June 24, 2022

Tips for Getting Out of Debt from the Pros at NASA Federal

Getting out of debt is a great way to help you raise your credit score, lower your financial stress, and become more fiscally fit. At the same time, it’s extremely challenging to do because of rising prices, limited funds, and often exorbitant interest rates.

Despite the hurdles—and with a little patience and dedication—you, too, can start working to reduce your debt. Here are some steps you can take to help you get started today.

Recognize If You Have Too Much Debt. Understand the warning signs, such as:

  • The inability to make all of your bill payments on time in a particular month or during more than one month
  • Overdrawing your bank accounts and paying additional bank charges due to insufficient funds
  • The need to borrow money in order to pay off one or more of your monthly bills
  • Paying only the minimum amount due each month on one or more bills
  • Using cash advances from your credit cards to pay other bills
  • Having at least one credit card that is near or over the credit limit
  • Receiving more than one late fee in a month or receiving late fees for one account each month
  • A reduction in funds in your savings or the total depletion of any emergency fund or savings

“It is important to be able to recognize these signs and watch out for them in order to avoid the severest forms of financial trouble like bankruptcy and foreclosure,” says Robert Kiel, Vice President of Loan Servicing at NASA Federal Credit Union. “Your priority should always be lowering your debt before either of these situations occur. Acknowledging that you have too much debt is often the first step in the process.”

Consolidate Your Payments. Consolidation loans, such as NASA Federal's SmartLoan
fixed-rate Credit Card Balance Transfer, or a Home Equity Loan or Line, can often save you money by lowering high-rate interest rates and reducing total monthly payments. They can also help simplify your finances by providing a single payment on a set schedule. “Just make sure that you don’t rack up more credit card debt on the cards you pay off with the consolidation loan,” says Kiel. “It’s a mistake many people make that only worsens things in the long run.”

Use Caution with Debt Settlement Companies. Debt settlement companies negotiate with your creditors to pay off your debt for less than what you owe. This service may sound good, but it comes with potential risks—it can damage your credit, be very costly, and isn’t guaranteed to work. States Kiel, “Because of the risks, debt settlement is considered an option of last resort.”

Make More Than the Minimum Payment. When you only make the minimum payment each month, interest charges keep compounding long after you’ve made your purchases. Instead, try to make the minimum payment plus the monthly interest amount (or more), as follows:

  • Rank your loans from highest interest rate to lowest interest rate.
  • Make more than the minimum payment on the loan with the highest interest rate. Make the minimum payments on all your other loans.
  • When the debt with the highest interest is paid off, take everything you were putting toward the account and add it to the payment for the loan with the next highest interest rate.
  • Repeat the process until you’ve paid all debts.

Find Extra Money. It may sound obvious, but the best way to get rid of debt quickly is to pay it off quickly. The longer it takes you to pay off your balances, the more you will end up spending in interest charges. To help speed things up, you may need to consider cutting out extra spending in your budget for a few months, taking on a second job or a side gig, or even selling items from around your house. Whatever you can do to find extra cash to put towards your debt will help you.

Find Low APR Balance Transfer Offers. If high interest charges are standing in the way of you reaching your debt repayment goals, find a lower APR offer. NASA Federal has fixed-rate balance transfer offers on new credit card balance transfers for life. By transferring your higher-rate balances to one of NASA Federal’s lower APR Platinum Credit Cards for the life of the transfer, you’ll be able to pay more per month toward the principal balance, pay off the total balance sooner, and save money in the long run.

Get Help. Talking to a NASA Federal Loan Workout Officer for members with a loan or line of credit, or a Debt and Budgeting Coach like those found with our partner, BALANCE, can help you prioritize your debt payments and rework your budget so that making your monthly payments is possible. “NASA Federal offers essential financial counseling services,” states Kiel. “Make sure to take advantage of everything available to you. We’re here to help.”

No matter what your financial situation may be, by starting small and sticking to your goals, you’ll be able to enjoy significant debt reduction over time. If you have questions or need further assistance paying down your debt, please contact NASA Federal at 1-888-NASA-FCU x540 or at membersolutions@nasafcu.com today.