![]() ![]() This method can help provide motivation to continue paying off debt You’ll likely notice progress quickly depending on how low your lowest balance is ![]() To do it, make a list of all your account balances in order of smallest to largest - and include the minimum payment amount for each - and allocate funds to pay the minimum amount due on all of your accounts except the one with the smallest balance.įor the account with the lowest balance, pay as much of the total due as you can until you’ve paid off all the debt and then continue to do the same thing with the account that’s next on your list. This is a strategy that’s commonly referred to as the “snowball method,” because it helps build up momentum to pay off debt. It can be motivating - and help you stay motivated on your debt payoff journey - to knock out your entire lowest-balance debt. Pay off the account with the lowest balance first, while continuing to pay the minimums on all other accounts. So which is the right strategy for you? It depends, and we talk to pros so they can help you pick the best strategy for you. ( See the lowest HELOC rates you may get now here.) Take out a home equity line of credit (HELOC) to provide a lower interest way to consolidate high-interest debt on other loans like credit cards. Pay more than the minimum on all your cards all the time. (S ee the lowest personal loan rates you may qualify for here.) Most important: When you get in a tough financial situation, it’s essential to analyze your budget and spending so you don’t find yourself in the same situation next month.Take advantage of debt consolidation, using something like a personal loan, which could offer a lower interest way to consolidate debt. Read next: Credit Card Debt Is the Most Embarrassing Kind of Debt Other companies can help, but they often charge fees. Whatever you do, make sure you deal with this directly with your lender. If your loan payments are too high for your current budget, you can enroll in an income-based repayment plan. If you’re out of a job or unable to pay your loans, look into deferral. There are now more ways to adjust your loan payments or defer your loans depending on your situation. If you have student loans, these are important but more flexible than other debt. If you’re having trouble figuring out the best way to pay these balances, contact a nonprofit credit counseling agency. Whatever you pay above the minimum goes straight to your principal and helps chip away at that balance faster. There are multiple ways to tackle credit card debt, but one sure strategy, Weeks says, is to pay more than the minimum if you can. A large credit card balance that goes unpaid can have a more significant impact on your credit score. If you’ve missed payments before on an account, that’s not a healthy account, and your creditor might seek harsher remedies to collect the debt. High interest rates, if ignored, will add to your overall debt. When you’re paying off credit cards, the most important things to consider are: interest rates, the health of the account, and the size of the balance. Read next: These Are the 10 Most Common Financial Leaks. The timeliness of your credit card payments accounts for 35% of your credit score, so consistent late payments will make it difficult to maintain, or build, good credit. They may be willing to give you more time or waive any late fees. In the case of all bills, if you know you are going to be late, inform your creditors. When those needs are covered, move on to credit card debts, student loan payments, and medical bills. Take a look at your budget, and where your money is going, and discern which things you truly need. Keep your lights and heat on, and pay your car loan. ![]() If money is tight, consider cooking more at home instead of going out to eat. Other necessities include food, utilities, and transportation (say if you rely on a car to get to work). If you fall behind on these payments, you risk defaulting on your loans or, worse, foreclosure or repossession. Secured debt, such as a mortgage, involves real property and is more essential to basic survival. You want to make sure you have a roof over your head.” ![]() “Pay your mortgage if you have a home-the most important asset that you have is your home, and you don’t want to fall into any foreclosure type situations. “You want to make sure you’ve got a place to live, as opposed to making sure that you pay your Discover bill on time,” says Kevin Weeks, president of the Financial Counseling Association of America (FCAA). Think basic necessities first, credit card debt second. When bills are due and you’re short on cash, don’t panic. ![]()
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