The following post has been contributed by Drew Cloud of the Student Loan Report.
Debt has become a way of life in the United States, with the average household now owing more than $100,000 in debt. From credit card balances to mortgages, car loans and student loans, Americans are taking on more debt than ever before. It often leads to issues in setting your priorities straight. Owing money can be incredibly stressful — and it can also make it hard for people to get out of debt. One method that many people may want to use to dig their way out of a financial hole is through a side hustle.
Those looking to start a side hustle may want to start driving for a ride sharing company, like Uber or Lyft, or perhaps they want to start selling their crafts online. Whatever their side hustle may be, they need the cash to start it up — but how is that possible if they are already in significant debt?
Freeing up money to earn money can be incredibly challenging when you are already carrying large amounts of debt. For example, the average American household has nearly $17,000 in credit card debt, over $176,000 in mortgage debt and almost $50,000 in student loan debt. With numbers like this, it can seem impossible to put together enough money to start up a side gig. But there are ways to start chipping away at that debt — and free up money to start your side hustle.
Refinancing Can Free Up Money For A Side Hustle
When it comes to mortgages and student loans, refinancing may be the right choice to help you lower your monthly payment and reduce the total amount of interest you pay over the life of your loan. A refinanced loan will typically have a lower, fixed interest rate and potentially a shorter repayment term.
When you refinance your loan, you are applying for a new loan that will be used to pay off the old loan (or in the case of student loans, multiple loans). The interest rate for this new loan will be based on a number of factors, such as your credit score, income and history of making on-time payments. If you initially applied for your mortgage or student loans when you had a lower income or credit score, refinancing can be a great way to get a lower interest rate — and to lower your monthly payments as a result.
Online repayment calculators can help you figure out if refinancing will save you money. For student loans, several sites such as my own website (studentloans.net) allow you to compare rates from a number of lenders so that you can be sure that you are getting a great deal.
For credit cards, you can apply for a personal loan to pay off all of your debts with one loan. This could include medical bills, balances on credit cards and more. Credit cards tend to charge high interest rates, with compounding interest. This means that the interest charges are added to the principal amount owed and any accrued interest, so that you will be paying interest on top of interest. Credit cards may also have variable interest rates that could go up significantly based on a number of factors, like if you miss a payment.
A personal loan with a low, fixed interest rate can help you get a handle on your credit card debt, making it far easier to pay off your credit cards. Loan interest rates are determined by your credit history and whether the loan is secured or unsecured, and are usually fixed for the life of the loan. If you are approved for a debt consolidation loan, you’ll make fixed monthly payments for the loan term (usually two to five years). Making a single payment each month may be particularly helpful for anyone who has a hard time keeping up with multiple payments on different debts.
Refinancing your mortgage and student loans and using personal loans to pay off your credit cards are two ways that you can reduce your debt to help free up money to start your side hustle. Once you have paid down your debt, you will then be able to more fully commit to your side gig, whether it involves setting up your own crafting business, driving on the weekends, or any other type of work.
Drew Cloud started The Student Loan Report when he found it difficult to find student loan information in one place. He now regularly writes about the latest student loan news as well as advice articles for those in college as well as for graduates working to repay their debt.