How To Pay Off Debt Fast – Focus on Financial Freedom Part #4

Hopefully you are now receiving some benefit and some clarity from the previous workbooks. In this section we look at How To Pay Off Debt Fast.

Some of this might seem very basic information but a lot of people don’t have a plan in place for paying down debt and/or continue to pay interest unnecessarily on loans

  1. Focus on paying off your most expensive loans first.
  2. Make sure that your credit works for you i.e. you are generating a % return higher than the % rate you are paying for your credit. This applies to either;
    1. A long term investment proposal i.e. purchase of rental property
    2. Having cash on deposit or in investments Vs using this cash to pay down debt
  3. Be more focussed and creative with the payment of mortgages and long term loans. Tens of thousands of Euros can be saved by making fortnightly mortgage payments.

With the fortnightly mortgage plan one additional monthly mortgage payment is made each year. That extra payment goes toward the principal of the loan. Since you are reducing the amount of the loan balance quicker, they are also reducing the amount of interest charged over the life of the loan.

Here’s an Example of How To Pay Off Debt Fast:

A 30 year mortgage for €500,000 at a rate of 5% means a total of €462,269 in interest throughout the life of the loan. With the €500,000 principal for a grand total of €962,269.

Making regular bi monthly payments reduces the term of the loan by nearly five years and saves interest of approx. €84k. If this property is someone’s home then this saved interest is from after tax income so the Gross Savings could be as high as €168k.

We are conscious that there are individuals who are having difficulty managing debt any paying off loans full stop. It is still important for them to be proactive and to carry out the first exercise. You should deal with your most expensive loans first and knowing what your position is an important first step.

Contacting somebody like MABS should be the second step. The personal insolvency system in Ireland has been changed significantly over the past few years and is far less onerous than it had been in the past.

Download the Pay Off Debt Fast Workbook


For related enquiries, further clarification and assistance with Tax matters contact Joe Cunnane at TRA Professional Services

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Joe Cunnane Practice Owner TRA Professional Services       Qualifications:  FCA Chartered Accountant & AITI Chartered Tax Advisor Joe has over 20 years experience working in both private practice and industry ... Read More »