Couple smiling and driving in sedan Couple smiling and driving in sedan
Couple smiling and driving in sedan

As counterintuitive as it may sound, getting a second chance at your finances can involve getting into debt. Sometimes it’s about covering unexpected costs, other times it’s consolidating numerous sources of debt into one so that you can focus on cashflow first.

Whatever the reason, if you’ve found yourself in debt, it is beneficial to pay it off as quickly as possible. In most cases, demonstrating you can pay a debt off well can help increase your chances of a more competitive approval in the future. It all starts with speaking to a professional to understand the steps to get you on track

Creating a budget

To start with, it’s helpful to know what your financial situation is. Creating a budget is a great way to work out your current finances and know how much money you can expect to have each month.

Add all your monthly sources of income and all your expenses per month, then subtract expenses from that income. Anything left over is money you can allocate to paying off your debt. Don’t worry if you don’t have anything left over though, this is where the main purpose of the budget lies. It lets you identify your spending habits and highlights where you might be able to cut costs.

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Change your habits

Sometimes, our spending habits can lead us into debt. Other times we go into debt to cover unexpected or large costs. Whatever the reason, when you enter into debt, you are entering into a different financial situation and so your habits will need to change.

Cut costs

While working out your expenses, you’ll start to have a better understanding of where you can cut costs. Limiting how often you eat at restaurants or make unnecessary purchases can give you extra money to use for your debts.

Some of the things you spend your money on will be needs. Rent or mortgage repayments, utility bills, groceries and medical costs are necessities. These are things you can’t live without. It’s important when paying off debt to be able to distinguish those necessities from wants. Wants are things you can live without, at least for a while, and could be removed out of your regular spending to allow for savings.

Shop smart

It’s not only what you buy but where you buy it. Groceries can be a good example of where you can shop smart. You need food and cleaning supplies to maintain your home and yourself but sometimes we don’t pay much attention to what we spend our grocery funds on. Most groceries have cheaper home brand options that work just as well. Clearance food is also frequently available and if incorporated into your shopping routine, will add to your savings.

For some, buying smart has a connotation of buying cheap, but that isn’t necessarily true. Ordering fruit and veg boxes direct from a farm can often mean cheaper but fresher and tastier produce.

It may be hard but shopping smart while you’re in debt will help free up some money that can be used to pay off your loan quicker. Once your debt is repaid, you can go back to getting your favourite cheese or relish.

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Prioritise your debt

Once you know how much money you have and understand where you can cut costs it’s time to prioritise your debt. Other than your needs, some people suggest that your debts should be the most prioritised expense you cater for.

That’s not to say that you can’t buy anything for yourself in that time, you still need to be living your life. But unnecessary spending may need to be limited to pay back your debt as quickly as you can.

Check for early repayment fees

When you sign on to a bad credit car loan, you might have a fixed repayment amount in your contract. Some bad credit car loans in Australia will have fees for early repayments. It’s worth checking these before you try to pay off your loan quickly.

If your loan has an early exit or closing fee then talk to your lender and work out how much it would be. Sometimes it will be worth it to close the account, but if it’s going to destabilise your finances then it might be best to stick to the original terms.

Pay more than the minimum

If your bad credit car loan doesn’t have a fixed repayment rate or an early repayment fee, it will probably have a minimum repayment rate. This is the least you can pay to uphold the agreement, but not necessarily the most (or most effective).

Paying more than this can quickly reduce your debt and give you your financial freedom back. That can either be by making each payment a little bit more than required or it could be paying off a lump sum when you can afford it.

Just make sure that paying over the minimum isn’t going to ruin your finances. Paying off a debt quickly isn’t worth it if you put yourself in a position to go back into debt.

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Do you have multiple debts?

If you have multiple debts including your bad credit car loan debt, one of the best tactics is to focus on one at a time.

You’ll have to keep making the minimum repayments on all your other debts to make sure that you’re meeting the requirements in your agreements. But while you’re doing that, choose one debt to pay more than the minimum.

Some people like to work from the debt with the highest interest to the one with the lowest. Others chose the smallest debts to pay off first and work up to the bigger ones. Whatever your method, breaking it down to one debt at a time can be the best way to approach it.

Don’t forget to give yourself rewards

Paying off debt is hard, particularly if you have to cut costs and crimp on all the things you usually enjoy. It’s important to make sure that you celebrate your successes. One small dinner or item to congratulate yourself on staying consistent or making milestone payments is unlikely to break the bank.

Celebrate your victories and remind yourself why you’ve been cutting these costs. Debt doesn’t last forever and you need to be able to enjoy your life.


Ready to take control of your financial future? Look no further! At Ume Loans, we specialise in providing solutions for individuals with less-than-perfect credit. Our dedicated team is here to help you secure the loan you need, tailored to your unique circumstances. Don’t let bad credit hold you back any longer—take the first step towards financial freedom and speak to our lending specialists on: (07) 5443 3863