Dave Ramsey says, “The hard truth is, debt robs you of your money now and steals from your future. Plus, you’re stuck paying for stuff from the past!”
One of the biggest things holding Americans back from building wealth is the amount of debt. Getting debt is much easier than paying it off, as it requires persistence, concentration, and of course, a lot of time. Before counting down feasible methods on how to pay off debt fast, we strongly advise being responsible while managing personal finances.
Debt Avalanche Program
A debt avalanche basically means you are tackling the highest interest credit card. Of course, it’s a pretty rational approach, as it comes down to simple math, but the problem is we are not rational enough. Let’s assume you have four different credit cards: $500 with 15%, $1000 with 17%, $2500 with 20% and $500 with 23% interest rates. So we see different interest rates with different outstanding balances. In the avalanche method, you would be going after the highest interest rate. This is a handy approach approved by a Financial guru Dave Ramsey, but we are human beings, and we like small victories to feel the upcoming success.
Snowball Method
The avalanche method is smart, and money people are going after the highest interest rate and trying to get rid of expensive debts as soon as they can. However, the snowball method works because you go after the smallest debt and state a small victory. Of course, it may sound counterintuitive, but this is the way the human brain works.
The Balance Transfer
If you are heavy on credit cards, you will possibly be offered a new credit card with zero percent interest. Many people claim this option as a financial trap, as now you have to deal with another credit card. It can be considered a bad thing at some point, but you can benefit from the balance transfer if you do it responsibly. You may consolidate all your credit balances into one debt and pay absolutely nothing in interest. The main thing that may work against you is the increase in the volume of your debt. Simply transfer all outstanding balances from your credit cards and start tackling the payments. Try to make way higher payments than your minimum monthly balance. Concentrate every penny towards paying down your debt, and you will definitely win.
Debt Consolidation
Use debt consolidation and roll multiple debts into one monthly payment. This option may not only help you get one payment per month but also lower the interest rate. Frankly, debt consolidation services should not charge you anything; they are making money by consolidating your debts and then getting profit from those payments. This is similar to getting a balance transfer, but you do it on your own without paying the service fee for debt consolidation.
Get a Personal Loan!
Another thing you can do to get out of debt is taking out a personal loan. There are too many personal loan options available to you. You can work with a local bank or take it out online. It’s all about your personal choice. Let’s talk about the home equity line of credit that may start with a zero balance. You may use this fantastic opportunity to have all your debts wiped out just by using your equity. But keep in mind that you have to pay off your debt responsibly; otherwise, you may lose your equity and be left with ruins.