Of all the financial woes you might be experiencing, eliminating debt should be among your top priorities. When you have a variety of different debts, it can be easy to simply try and pay off the base level payment each month. But taking this approach will end up costing you significantly more than if you had focused more intently on eliminating debt in the first place.
Snowballing Your Debt Payment
Snowballing can be a great way for you to get started on the path of paying off your respective debts. Derek Moneyberg advises you to look at all the debts you have and start paying them off in order of smallest to largest. Why do this?
It allows you to knock off smaller debts bit by bit which then allows you to use the money that you had allotted each month to pay off bits of the smaller debts each month and then to channel that into your bigger debts.
Debt Consolidation
Debt consolidation refers to the process of taking out a loan to pay off other loans. Initially, this might sound like a tricky plan—why accrue more debt to pay off old debt? But in all reality, it can be a smart move if you think about it carefully.
Some of the benefits of debt consolidation include the possibility of lowering the amount you pay in interest. If you’re able to pay off a variety of debts that have high interest rates in favor for this larger loan with a smaller interest rate, it will end up having been a good financial move.
Renegotiate Your Interest Rates
As you do an inventory of the different creditors that you owe money to, take the leap and contact some of them about your interest rates. You may find yourself surprised by the fact that some will be willing to lower your interest rate after talking with them.
According to Credit Repair, this renegotiation is possible if you have a history of being a good user and if your payment history is consistent. But in the end, having lower interest rates will save you significantly and will help you pay off your debts faster.
When it comes to eliminating debt, there are more strategies to consider than simply changing your budget and lifestyle. While these things are definitely important, it’s also important that you think about some of these strategies. If you have further questions, reach out to a financial consultant for further guidance.