If you’re like many millions of Americans, you have debt. ValuePenguin states that the average is $5,700 per person and $16,048 per household. More than a third of all households, 38%, have some amount of credit card debt. This is an issue for people from all walks of life, no matter age, income, location, gender or race. While some people are more likely than others to face debt, the truth is that all of us can find ourselves in a position where we suddenly owe more than we can handle.
If you’re in debt and you want to get out, but you don’t know how, there are several methods that may work for you. Here are three ways you can start to pay off your debt today.
- Strategize. If you just start throwing money at every debt, you may find yourself spinning your wheels and getting nowhere fast. However, when you formulate a strategy, you’re more likely to see your progress which will help propel you forward. First you need to identify how much you owe to each card or loan and the interest rate charged. Then, there are popular two popular ways people tackle debt:
- Snowball Method – Pay the minimum amount due on all your debts except the one with the lowest balance. For that one, take every dollar you can and pay down that debt. Then move on to the next smallest balance. This will allow you to see the number of debts you have go down quickly.
- Avalanche Method – Pay the minimum amount due on all your debts except the one with the highest interest rate. As in the previous method, put everything you have to that highest interest rate debt. This will lessen the amount of interest charges you accrue as you pay balances off.
- Consolidate. When you have multiple outstanding debts, sometimes the minimum payments alone are too much for your budget to handle. This is where debt consolidation might help. This typically involves taking out a loan for an amount that will allow you to pay off as many of the balances as possible. You will still owe the same amount of money, but you’ll only have one minimum payment due. You’ll want to make sure you’re not going to be charged a higher interest rate than you’re currently paying so that you don’t accrue more debt than you where you began. But if consolidation can help you budget in a way that you won’t miss payments, it may well be worth it.
- Transfer. If you have a credit card that is offering a low- or zero-percent balance transfer, and you have the available credit to take advantage, this can sometimes be very cost effective. These promotions often last for several months to a year, offering significant savings when you move a balance from a high-interest rate card. Just keep an eye on those transfer fees and make sure the savings aren’t eaten up.
It’s not easy to get out of debt, but if you take a hard look at the numbers and then make a plan, it can happen much quicker than if you fly by the seat of your pants.
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