Now if you are someone who has accumulated debt in 2020 (or previously), lets talk about ways to payoff your debt. You have heard the ads on the radio and see the commercials on TV, but are they legit? Maybe, but do you want to try and find out you have been scammed?
Here are some of the ways that you can payoff your debt by yourself:
There is the snowball way: Here is an example: you have a $500 medical bill, a $2,000 credit card balance and a $10,000 car loan. You would make the minimum payments to the credit card balance and the monthly payment to the car loan, while paying as much as you can to the medical debt. Once the medical debt is paid off, you would start to pay off the credit card debt. You payoff your debt by paying the smallest balance first and moving to the next smallest debt and so on.
The avalanche way: In this scenario you will pay the minimum payments to all your debt except the one with the largest balance. Here is an example: you have a $7,500 credit card balance on one card, $9,000 on another and $1,000 balance on a personal loan. With this method, you would pay the minimum amount due each month on the $1,000 loan and the $7,500 credit card. You would pay as much as you can (more than the minimum due) on the $9,000 credit card to pay this off faster. Once this is paid off, you would move to the next largest balance and so on.
Debt consolidation is another option: You would apply for an unsecured loan and consolidate all your debt into one loan and have one monthly payment to deal with. Depending on what type of debt you are consolidating, you may have a lower interest rate. Typically, this would be lower than credit card rates, but may be higher than student loan debt. You would need to compare terms and costs to see if this method is right for you.
A Balance Transfer can be an option: With either your current credit card or opening a new one, you can transfer your debt to this credit card with zero percent interest for a fixed term. A few cautionary notes: look at what fees might be involved for your situation. Also, if you chose this option on a credit card that you have a balance on, your payments will be applied to the highest interest balance first. Meaning you are not paying down the zero percent balance until the higher interest rate balance is paid. This might take longer than the zero percent offer is good for. If you do this, plan your payments wisely. Take the balance and divide it by the number of payments during the zero payment term. This is the amount you will be nee to be able to pay every month to pay this balance off. If you fail to payoff the balance during the zero interest period, you will owe the remining balance with the new interest rate back from the date of the transfer.
Next issue, we will discuss other options that are available, that you will need to think about before moving forward. Remember that debt is your financial enemy, so make a plan to tackle your debt now rather than later.
You will need to check with the appropriate professionals to discuss the pluses and minuses of each option before you make a choice.