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HOUSEHOLD debt is at a 25-year high, with Australians collectively owing approximately $1.8 trillion according to SocietyOne.
The peer-to-peer lender says the data equates to $79,000 for each person living in Australia.
SocietyOne CEO Matt Symons says it's no wonder Australians are looking to reduce high-interest debts like credit cards.
"For many Australians, clearing credit card debt feels like an unachievable goal," Symons says.
"According to the RBA, standard credit card rates are around 19.75 per cent per annum.
"Paying the minimum monthly amount on a $5,000 credit card debt means it could take up to 45 years to pay off. That's longer than most mortgages.
"It takes so long because of the high interest rates and additional costs, which is how banks make such huge profits."
SocietyOne has shared five simple tips to help Australians become debt-free faster:
1. Consolidate your debts
Credit cards are just one source of debt. Payday loans, overdrafts, store credit and other types of debt can add to the burden and their sky-high interest rates make it difficult to get them paid off.
Debt consolidation involves taking out a personal loan at a lower interest rate to pay off all the other debts. It can significantly reduce the cost of debt and help you pay it off sooner. Plus the convenience of a single monthly or fortnightly payment makes it easier to track your debt and less likely that you'll accidentally miss a payment.
While banks have traditionally offered personal loans, it is now possible to get a personal loan at a much more favourable, personalised rate through peer-to-peer (P2P) lending. P2P lenders like SocietyOne have low overheads and work with a network of investors to offer lower interest rates and fees for fixed, unsecured personal loans. You can apply online and get a fast response.
2. Take stock
To manage debt better, it is vital to assess your current spending habits. Begin by printing out credit card and bank statements for the past few months and reviewing them line by line. Make a note of the purchases you make, and see how often you withdraw cash, which is harder to track.
This exercise will help you see where you can reduce your spending. Your savings can be put towards debt reduction each month.
3. Start cutting
To clear debt quickly it may be necessary to make some lifestyle changes, cutting out the luxury, non-essential purchases. This can include: making coffee at work and taking your lunch to work instead of buying it; reducing the amount of take-away and restaurant dinners you eat; and resisting the urge to buy shoes and clothes, even if they are on sale.
Obviously this also includes more expensive items. For example, if you are trying to reduce debt then you should not look to upgrade your car or book an overseas holiday.
4. Don't sacrifice your salary
Salary-sacrificing to boost your super is a sound financial strategy but not if it comes at the expense of paying down your debt. Instead, put that salary towards debt reduction so that, when the debt is gone, you can go right back to pumping up your superannuation account.
5. Stay on top of it
If you ignore debt and fail to change your spending habits, you are likely to fall deeper and deeper into the hole. You don't have to worry about the big picture: break your debt management plan into small, easy tasks like monitoring your daily expenditure.
Where possible, keep only the amount absolutely necessary to get you to your next payday in your account and put the rest towards paying down debt.
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