We all want to get out of debt, but many of us simply don’t know how to do it quickly and effectively. You may have heard of a few popular terms for debt repayment strategies, but the real proof is in the outcome. Why pay more than you have to in interest payments and be locked into paying lenders for years beyond what you intended? Try one of these strategies to get out of debt fast!
The Debt Snowball Technique
This strategy is simple. Take the loan with the smallest balance and pay every extra penny you have each month to this account, making only minimum payments on all other loans or lines of credit. By keeping your other accounts in good standing with minimums and attacking the smallest balance first, you will repay this account so fast that you will see much more immediate results of your hard work. This keeps you motivated to keep going! From here you move into the next account that has the smallest balance and you do the same, attack it with every extra penny until paid off.
The Interest Rate Technique
This strategy focuses on paying back the loan with the highest interest rate, not the smallest balance. By choosing the account with the highest interest rate to attack with every extra penny first you reduce the principal amount owed each time, saving you money in the long run. As your balance reduces so does the amount of money added in interest each month. Another important aspect of this technique is interest rate negotiation. Contact your lenders along the way and ask for a reduction of the interest rate as a reward for your timely and over-minimum payments in the last few months. It is hard for lenders to deny this request since you have put forth a great payment effort, and when they do grant your interest rate reduction you are once again saving more money as you work to continue paying off the balance.
It is important to note that neither of these techniques is likely going to help you if you are in default and behind on your debt payments. Contact a bankruptcy lawyer in Cincinnati OH for help with credit card debt solutions that can get you back on track.