Conquering debt mountain is a big step towards financial freedom. Take a look at how you could pay down debt and turn your mountain into a molehill.

Know what you owe

The first step is getting your head around exactly how much debt you have. Write a list detailing:

  • What you owe
  • What the interest rates are
  • How much the regular repayments are
  • How long the term of the debt is.

Make a plan to get out of debt

Once you've got a clear idea of everything you owe, you can start thinking about the best way to pay down your debt. We've listed some different debt repayment strategies below. Remember that this is only general information and doesn't take into account your personal circumstances or what you can afford.

Focus on debts with the highest borrowing costs

If you baulk at the thought of paying high interest rates or expensive fees, you might want to focus on debts with highest borrowing costs first. When working out how much you can afford in repayments, remember to include your regular expenses and income in your calculations. You'll need to make sure the repayment amounts are affordable for you.

  1. Rank your debts from those with the highest borrowing costs to the lowest. Remember to include the interest rate, interest fees and any additional charges like late payment fees when you're ranking.
  2. Continue to make at least the minimum payments on all of your debts and loans. If you can pay more than the minimum repayment amount, even if its by a small amount, it may help pay down your debt faster.
  3. If you can afford it, consider making extra repayments on debt with the highest borrowing costs. Once your most expensive debt is paid off, focus your extra payments on the debt with the next highest borrowing costs, and so on, and so on, until all of your debts are paid off.

How much you're able to pay off will depend on a few different factors including your current income and expenses, and how much the minimum repayments are.

Consolidate your debts

If having a single debt rather than a bunch of smaller ones would work best for you, then debt consolidation could be an option. This is where you roll multiple debts into one loan excluding home loan debt – meaning you have just one regular payment at one interest rate to keep track of and manage.

To get a debt consolidation loan, you can apply for a personal loan. Make sure you look at all the fees involved with setting up the loan, so you don’t get any surprises. Please note debt consolidation is only a good option if the interest rate on the personal loan you'll apply for is lower than the interest rate on your existing debts. You’ll have to do your own math to see what your current interest rates are and compare that to our personal loan interest rates.

Having one loan to manage rather than several debts might make life easier, but it won’t magic away your obligations. Use our personal loan calculator to get an idea of what your repayments might be and if you’ll be able to meet them.

Consider a balance transfer

If you think you could pay off your debt within a few months, a credit card balance transfer might be worth considering. This is where you transfer the balance from another bank’s credit card or a store card to a Kiwibank credit card and you'll pay our balance transfer interest rate for a specified period of time. The balance transfer interest rates and periods change periodically.

If you have a balance transfer on your card, you won't be eligible for interest free days on any purchases. To save on interest, avoid spending on your card until your balance transfer is paid in full.

Please note at the end of the balance transfer period, your interest rates will revert to our standard interest rates, so it's important to pay off your balance before then to take advantage of low rates. This means you'll have to do your own math and see if based on your income and expenses, you're likely to be able to afford to repay all of your debt within the balance transfer period. If you can’t and the interest rate goes up after the balance transfer period, it’s possible that you'll end up paying more interest on that debt.

You'll also need to close your credit card from your previous bank after transferring to Kiwibank. This means you'll avoid any temptation to keep spending on the other card and you won't have two credit cards to pay off.

More than you can handle?

If you’re struggling to cover your minimum repayments then get in touch at 0800 113 355, we may be able to help. If you're going through financial hardship, we may also be able to help you.

See more about our financial hardship assistance

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