If you're a loyal reader of our blog, then you'll know this space is chock-full of advice on credit and debt management. We're passionate about talking about credit and how to manage it, because our company is structured to help people improve their credit via automotive financing, and an educated guest is a good guest, and more likely to succeed with our finance program.
One of the biggest hang-ups we see that keeps people from being able to purchase a vehicle with us is debt management. Many people come to us who need to reduce their current debt before we can help them (it hurts people when they're approved for loans they can't afford). Between student loans, medical bills, credit card debt, and living expenses, the bills pile up faster than we can keep up with at times. And, with the rising costs of living in America, it's no surprise that a large chunk of the country's population couldn't afford a small emergency bill if they needed to.
One of the quickest ways to reduce your debt to income (DTI) ratio is to remove excess expenditures. Of course, it can be hard to tell what's excess and what's essential until you put together a list of all your current monthly or quarterly expenses. Once you have a complete overview of your debts, focus on how they're paid, and what type of interest they accrue. If you have high interest credit cards, call your credit card company to see if you qualify for a lower rate. Next prioritize how you want to pay off your existing debt. Are there smaller bills that you could pay off faster by only paying minimums for a short time on larger bills? (While we applaud the desire to pay more than your required monthly statements, sometimes paying off debt that's within reach is a quicker way to show a better debt to income level.)
If you're struggling to pay down your current debt with your current income, and you've already exhausted your options on your current stack of bills, consider whether or not you can take on extra work, like a part time job or hobby that pays (like an Etsy shop). Even just a few extra working hours--like seasonal work--can help clear out debt a lot faster than just your current line of work.
And, when all else fails, consider your assets. Are there purchases you now regret because they cost too much, but you went ahead with them anyway? Are you sitting on a lot of electronics or furniture that would fetch a nice sum on Craigslist or your local want ads? Consider this a great option for some quick cash--and a fast way to clear up home clutter, too!