Consumer debt hit a mind-boggling $14.3 trillion at the start of this year.
That’s a frightening statistic! It just goes to show how many Americans are taking out loans, paying with credit, and struggling under the burden of debt thereafter.
Needless to say, finding yourself in that predicament is never fun.
But the situation might not be as dire as you think! Approaching the problem with a proven strategy can make paying down debt far easier. Want to learn more?
Keep reading to discover 3 effective debt payment strategies.
1. Consolidation
Debt consolidation’s one of the most common (and effective) repayment strategies out there. Here’s the basic principle:
You take out an affordable loan to pay off your current expensive one(s)!
Now, taking on debt to get out of debt might seem strange. But it makes good financial sense if you can acquire a loan with better terms. A fixed-rate, low-interest loan will save you significant sums of money over time if you use it to repay high-interest ones.
The monthly repayments will decrease and the chance of missing them will go down as a result. Even better, the fixed-rate makes everything more predictable too.
2. Transfer Your Balance
The idea behind balance transfers is similar to debt consolidation: you’re trying to bid farewell to high-interest rates in favor of something more affordable.
This time, though, it’s all about credit cards.
Start by finding a credit card with a lower APR to the one you’re paying now. If you can transfer your current credit card balance over to it, you’ll save money and make the repayment process far easier. However, be wary of expensive transfer fees and ensure that new APR won’t shoot up in due course!
3. The Avalanche Method
Do you have multiple debts to contend with each month? Well, the avalanche method could be the solution you need.
Here, you commit to paying the minimum monthly repayment for every account before turning your attention to the loan/credit card with the highest rate of interest.
The aim is to be aggressive, paying it down with as much money as you can spare until it’s been paid off.
You then repeat that process with whichever account had the second-highest rate of interest, then then the third, and so on. Follow that pattern until you’re debt-free!
Working from the highest interest rate to the lowest will free up more cash with each debt you repay. The effect will be like an avalanche, with each ensuing debt becoming easier to repay.
Remember These Debt Payment Strategies
There’s nothing fun about being in debt. It’s stressful, onerous, and can soon feel overwhelming! Thankfully, having some debt payment strategies up your sleeve can make an almighty difference.
We hope this post has helped in that regard! Keep these debt re-payment strategies in mind and you’ll be in a better financial situation in no time.
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