Debt is a scary thing. It can feel like you are swimming in a pool of red ink, and it seems impossible to get out.
But don’t worry, we are here to help! Here are various ways to manage your debt, fix your credit score, and finally breathe a sigh of relief.
- Use the Snowball Method
The snowball method is when you pay off the smallest debt first, putting as much money toward it as possible until it’s gone. Then you roll that payment into your next smallest debt and do the same thing until you pay off all your financial obligations. It’s like moving a ball of snow downhill that keeps getting bigger with each push.
This method is a great way to pay off your debt and get the satisfaction of having a monthly bill paid off and out of the way, but this may not be the best option for you if you have high-interest loans.
If you decide to use this method, ensure that any accounts in good standing will stay open, not negatively affecting your credit score. You can also take those bills with zero percent finance offers and apply their minimum payments toward another loan.
- Or Consider the Avalanche Method
The opposite of snowball is the avalanche. The avalanche method focuses on paying the debt with the highest interest rate first. This will save you money in the long run because you’ll reduce the total amount of interest you have to pay.
While this may seem like a more challenging option, it can be less stressful because you progress each month and see your debts slowly disappear. Plus, if you have any extra cash at the end of each month, put it toward your high-interest loans instead of spending it frivolously.
Using this method, keep all accounts open, and in good standing so your credit score stays healthy. You should also try to avoid any unnecessary expenses and use that money to pay down your loans.
- Use Prepaid Cards More Than Credit Cards
A prepaid card is a debit card you can load with money. When you use this type of credit, the money comes out of your account immediately and will not show up as debt on your credit report.
While some may view these cards as an unnecessary expense and prefer to stick to their bank’s debit or checking accounts, they are instrumental if used correctly.
A prepaid Mastercard will come in handy for people who want to avoid overdraft fees or those trying to stay within budget by limiting themselves only to what they have loaded onto their card. You also don’t need good credit history, such as traditional banks require. All it takes is enough cash at hand.
- Consolidate the Debt
One way to make your debt easier to manage is by consolidating it. This means that you take all of your loans and put them into one big loan with a lower interest rate.
This can be helpful because it simplifies your payments and makes it easier to keep track of what you owe each month.
It’s important to remember, though, that this option will lengthen the amount of time it takes for you to pay off your debt. If you are looking for a quick fix, this may not be the best solution for you.
When consolidating the loan, work with the right lender. Shop around for the best rates and ensure that the rate is fixed so it does not change over time.
If possible, try to get a loan from someone who will offer lower interest on new purchases or allow them without charging you any extra money upfront at all.
- Transfer Credit Card Balances
If you have a high-interest credit card, one way to reduce the amount of money you are spending is to transfer the balance to a card with a lower interest rate. This can be helpful because it will save you money in the long run and even allow you to pay off your debt sooner.
When transferring credit card balances, be sure to look at the APR and any other fees that may apply. If you are looking for a quick fix, this is not always your best option because it can take time before seeing results from new cards.
If you’re feeling overwhelmed by your debt, don’t panic! From using the avalanche method to transferring credit card balances, you can pay it off several ways – some quicker than others. Either way, you have options to clear the pile.