Easy Debt Payoff Strategies

Need to pay off debt and don’t know how? I detail three different strategies to help you attack your debt so that you can pay it off sooner and live a financially responsible life.

If you have debt and need some debt payoff strategies, then there are a few commonly used strategies to attack paying off your debt.

The first step is to create a list of all of your debts. List out the name of the debt, the total debt amount that you owe, the interest rate, the due date, and the minimum monthly amount.

SNOWBALL STRATEGY

  1. The first strategy is called the “snowball” strategy. For this strategy, list your debts in order by the LEAST amount of debt that you owe.
  2. You will pay the minimum amounts of all of your other debts.
  3. You will then choose the debt with the least amount of money that you owe and use ALL EXTRA MONEY to pay towards that debt.
  4. Once the first debt is paid off, then you will move to the second debt on your list. You then take ALL EXTRA money to pay towards this second debt. You essentially should be paying more towards this second debt as you are paying the minimum amount plus the amount you were paying towards debt #1.

This is called the snowball strategy because you are paying off the least amount of debt first. The benefit is that you may pay off your first debt faster and then see the reward. This helps you to keep going and paying off more debt.

DEBT AVALANCHE STRATEGY

  1. The second strategy is called the “debt avalanche” strategy. For this strategy, list your debts in order by the HIGHEST interest rate.
  2. You will pay the minimum amounts of all of your other debts.
  3. You will then choose the debt with the highest interest rate use ALL EXTRA MONEY to pay towards that debt.
  4. Once the first debt is paid off, then you will move to the second debt on your list. You then take ALL EXTRA money to pay towards this second debt. You essentially should be paying more towards this second debt as you are paying the minimum amount plus the amount you were paying towards debt #1.

The benefit for this strategy is that by paying off the highest interest rate first, you will be paying less interest, and less money, overall. From a purely financial standpoint, this is the best choice. However, if the

CREDIT CARD BALANCE TRANSFERS

Another option, especially if you have credit card loans or other high interest loans, over 15%, may be a credit card balance transfer promotion. If you have good credit score and payment history, you may be eligible for a credit card balance transfer. You will want a 0% interest fee, usually for 12 months to 24 months.

Also, the transfer fee may vary from 3-5%, but try to negotiate for the lowest fee amount. The goal is then to pay off the credit card balance before the offer ends. You will then save the interest fees, which could potentially add up to hundreds of dollars.

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