The average American has over $90,000 in debt, which is no small chunk of change. We’ve accepted debt as a way of life, but that doesn’t mean it’s any less stressful to deal with it.
But fortunately, there are efficient ways to deal with debt so it’s more manageable.
If you have a good amount of debt, don’t panic just yet. Here are some debt repayment strategies to consider.
Use the Snowball Method
Chances are, you have several sources of debt, such as credit cards, mortgages, and student loans. With the snowball method, you’ll want to list out all of these, starting from lowest to highest.
Now, what you’ll want to do is make minimum payments on all of them, except for the lowest amount of debt. You’ll put everything you can toward it every month.
As a result, you’ll quickly pay off your lowest debts and work your way up, all without missing minimum payments.
Use the Avalanche Method
This debt payment strategy is similar to the snowball method. However, instead of ordering things by debt amount, you’ll order them by interest rate. And instead of going from lowest to highest, you’ll go highest to lowest instead.
By tackling debts with the highest interest rates, you’ll minimize the time and money spent on paying interest and will pay more of the actual debt. This will enable you to eliminate debt quicker.
Most people prefer to use the avalanche method since it’s a faster debt repayment strategy. However, not everyone has enough cash lying around to pay off those debts with huge interest rates. If that’s the case for you, then you might be better off with the snowball method.
Consolidate Your Debt
One method people go for is consolidating loans. This is where you bundle all of your debt into 1 line of credit, such as a credit card or personal loan.
What this means for you is you won’t have to worry about individual payments anymore. You also won’t have to worry about various interest rates since it’ll just be a single one.
Best of all is, you can usually sign up for introductory rates, which often include 0% APR for a length of time. You can take advantage of this by paying off as much of your debt off within that time, as you’ll be solely paying the principal and not the interest.
Practice Good Debt Repayment
Debt repayment can be a tough thing to tackle. But if you’re smart about it, it can be very manageable. You can choose from either the snowball method, avalanche method, or consolidation of all your debt.
So take the advice in this article and apply it to your life. You’ll be able to chip away at debt without worrying too much about your normal expenses as well! You’ll be debt-free in no time.
Want to read more about finance? Then check out our article on alternatives to bank financing now!