Your credit card debt often becomes an albatross that impacts your mental and physical health significantly when it spırals out of control.
Whether the debt is from medical bills, shopping spills, or unexpected costs, you should handle all debt the same way – one step at a time.
We’ve looked into some of the best steps you can take to pay off your debts and those steps are up next.
One Debt at a Time
Do you carry more than one card with a balance? If so, make sure you pay at least the minimum on each card at all times. Then prioritize one card at a time to pay down the total balance.
Prioritize Your Budget
One way to speed up your loans’ repayment and get out of debt faster is to review your monthly expenses and search for ways to cut your costs.
Start by monitoring your spending for two weeks to become more conscious of where your money is going.
Consolidate Your Debts
Consolidating your debt will allow you to consolidate multiple higher-interest balances into one with a lower rate so that without raising payment rates, you will pay down your debt faster.
To switch debt off high-interest cards, take advantage of a low balance transfer rate. Be mindful that there are always 3-5 percent balance transfer fees, but the lower interest rate savings can sometimes be higher than the transfer cost.
The Avalanche Method
You can pay down your balances with this debt reduction technique, also known as debt piling, to get rid of debt from the highest interest rate to the lowest. It works as follows.
- Pay the minimum charge on all your accounts.
- Pay as much as you can into the account with the highest interest rate.
- Start paying as much as possible on the account with the next highest interest rate until the debt with the highest interest is cleared out.
- When all your debts are repaid, continue the process.
- You’ll free up more money each month every time you pay off an account to put towards the next debt. And when you handle your debts in the interest rate order, you’re going to pay less total and get out of debt quicker.
- It can take a while, like an avalanche, before any changes to be apparent.
The Snowball Method
You’ll pay off your debts in sequence from the smallest balance to the highest with this process. Here’s how it works.
- Make sure you pay the minimum charge on all your accounts.
- Add as much extra money as possible into the account with the smallest balance.
- After the smallest debt has been paid off, take the money you put into it and now funnel it to the next smallest debt.
- Go on with this process until all your debts are paid.
Many people enjoy this strategy because, in the beginning, it requires a series of small achievements, which will give you more incentive to pay off the rest of your debt.
With the debt snowball process, there’s also the opportunity to increase your credit scores more efficiently, as you lower your credit usage on individual credit cards faster and decrease the number of outstanding balance accounts.
Start Sticking to a Monthly Budget
You will need to build a monthly spending plan and stick to it. This will help you learn how to stay out of debt and to avoid borrowing from your credit cards again and again.
This will not only guarantee that you live under your means, but it will also give you a fixed timetable for when you should expect to get debt-free.
Pay Off Debt With a Savings Account
Many people regularly contribute to a savings account, which is fine, but remember that this is cash that might help you pay off what you owe more quickly.
You may want to consider suspending additional contributions to your savings account until you have developed an emergency fund and are saving for irregular expenses.
Pay Off Debt With Balance Transfers
One choice is to move your credit card balance to a new card. If you have an account with a high-interest rate, you can move the balance to a lower interest rate card and pay less cash on interest over time.
The avalanche approach can fit well with a lower-rate balance transfer card. Since you can wisely reduce the interest rate on the highest-interest debt by using a balance transfer, it can give you time to concentrate on the next-highest interest account.
For an exclusive time (often 6-18 months), many balance transfer credit cards also give a 0 percent APR. A 0 percent APR deal offers you the ability to pay off your credit card balance without further interest charges being incurred.
It can always feel like there’s no way out when you are drowning in bills and receiving harassing phone calls from creditors. But there is still hope as long as you choose a plan of attack and then follow it religiously.
You will be able to finally liberate yourself from the shackles of debt and come out financially wiser.