Great Strategies To Pay Down Debt Fast!
There are tons of different debt strategies, but one of the most common factors among them all is that the best time to start is now! By figuring out where your debt stands and how best to target your own unique situation, you can start to pay down debt faster than you expected and put yourself on better financial footing.
Pay Off the Balance with the Highest APR First
This strategy is pretty straightforward: You look at all of your balances and the interest rates associated with each. Whichever one has the highest annual percentage rate (APR), that’s the one that gets the focus of being paid off first (while still making minimum payments on your other cards, of course). Once that card is entirely paid off, you move on to the one that has the next highest APR, and so on.
From a monetary sense, this strategy may make the most sense, as it will cut out you spending so much on interest. To implement this, you simply boost your payments on that card up to whatever you can afford and stick with it. If you start by paying $150 extra on that credit card, keep paying at least $150 each month until the card is paid off.
Be sure to stick with your boosted payment amount even as your balance and minimum payments get lower. Remember: The goal is to get your balance to zero. Easing up on your payments as your balance creeps lower will slow your progress. – Credit.com
Start Wherever You Can – It Only Gets Easier!
Did you know that if you focus on paying down the easiest and cheapest debt first, studies show that it gets easier to pay larger and larger amounts with time? It might sound weird, but take a look at the excerpt below that explains why the same amount spent on one account, rather than spread across several, might be the right strategy for you.
Strictly looking at the numbers, it’s smartest to pay down the accounts that carry the highest interest rates first. That way, you’re staving off as much interest as possible and don’t end up owing even more.
But what makes sense mathematically on paper doesn’t always work best in real life. Paying down debt is as much about motivation as it is about money, and most people fall into a different camp of debt repayment: Prioritizing accounts with smaller balances, rather than those with higher interest rates, according to research from the University of Michigan.
While it typically goes against the advice of financial advisors, who will cringe as they see the lost dollars in interest piling up, new research from the Harvard Business Review supports this strategy for paying off credit cards…
…That means if you have two credit card accounts, one with $4,000 in debt and another with $6,000 in debt, repaying $2,000 of the $4,000 account would feel much more productive than spreading $1,000 payments over both of the accounts. Even though it’s the same amount paid, with the first one, you’re already halfway there to closing it out — a mental victory. –Business Insider
How do you plan to pay down debt?