Effective Financial Solutions: Paying Off Debt
Posted on 27. Oct, 2009 by admin in Debt
Having a large debt can prevent you from enjoying life to the fullest, be it taking those long holidays you’ve been hoping for, or having the peace of mind of knowing your retirement fund is being well taken care of. Experts don’t always agree on the matter, but general consensus is that the best way to pay off debt quickly is using the “snowballing” method.
This particular way to pay off debts is set on the idea of saving money in the long run. Let’s say you have $300 a month to pay off your debts and 3 different payments. Instead of evenly distributing the money – $100 to each creditor, the “snowballing” method says you should be more preoccupied about interest rates. Make minimum payments on the two debts with the smallest interest rates and use the rest of the money to pay off the one with the largest interest rate. After that’s done, move on to the one with the second-highest, and so on. You’ll still be paying $300 a month, but your debt will be reduced much quicker. If, by some form of budget-gymnastics or just a stroke of luck, you find that you have some extra cash in your account, throw that toward your debt also. Something as little as an extra $10 a month can save you a lot more in the long run.
