In your personal finances there will always be debts or credits, and as long as they don’t overwhelm you, stress or leave you challenged for covering your current expenses, you will not have to worry. But if you are one of those people who depends on your card or credit cards for everything, making minimum payments, and seeing how your interests grow; or if you have a credit that you pay regularly, but you don’t seem to reduce your original debt, you may need a new plan.
If you are ready to pay your debts, we present the two best methods to attack it and regain control of your personal finances.
How to pay your debt?
We share two methods that are almost exactly the same: both focus on the minimum payments of all your debts except one; this debt, the only one that doesn’t receive minimum payments is the debt that you are most interested in eliminating, and it’s the one that will receive all the money that you can spare, until you have paid it in full. When you have eliminated this debt, another one takes its place. By eliminating your debts one by one, you will have more money that you can allocate to pay your other debts, one by one until they all disappear.
The snowball method
With the snowball method, you pay your debts from the to the largest balance, regardless of how much you are paying in interests. The reason for this, is that many times people have a lot of minimum monthly payments, and it can become overwhelming. Paying your debts from the smallest to the largest can be motivating: you begin to eliminate small debts very fast, and you could even get rid of a complete debt every month during the first months. It’s a way to see rapid progress and not feel intimidated when facing your biggest debts.
The avalanche method
In the avalanche method, you pay your debts starting with the one with the highest interest rate until you reach the lowest, regardless of your balances. Mathematically this makes more sense: you pay less in interest, and by saving money in interests, you can pay off your debts more quickly. Focusing on the higher cost, you can reduce your debts from the most expensive to the least.
The best way to pay the debt is to make the minimum payments on all your debts, except one; Concentrating on one debt at a time until all your debts disappear one by one. What debt you decide to pay first ,in the end is not so important, the most important thing is to stay motivated. No matter which method you choose, the worst result is to give up or go back into debt.
If you want to get rid of your debt and take control of your personal finances, join Glass, and know the state of your finances all the time and wherever.