Debt is a small word and yet has a burdensome influence on our mental and physical health. Living, in today’s economy we can easily fall into the never-ending trench. Result? Continuous exposure to stress, and health issues, which add even more to your medical bills debt.
Debts can reflect on your credit card score and hence is necessary to control but how? First, you need to understand that there are two categories of debts: revolving debts and installment debt.
Revolving debts are those that come from your credit card with an interest rate subjective to change. Revolving debts specifically influence your credit card score. You pay your revolving debts based on your income and bank amount.
On the other hand, installment debts are those you get from mortgage, house, care, student, and personal loans. Here the amounts are heavier and an amount is fixed with an interest rate to be paid in installments. Installment debts are not reflected on your credit card score. However, if you fail to comply with the monthly payments, the lender has the authority to report you to the credit bureau and possibly you will be charged extra money.
How Can I Pay Off My Debts Easily?
At times it doesn’t matter how religiously you are paying your debts, it still appears to be a never-ending road generating frustration in life. Debts can be an obstacle in your dreams as well.
Debt elimination strategies are a roadmap that helps you target multiple debts at once. You can use one strategy or you try a few to see which one works out best with your income. Below are six strategies to pay off debt easily.
It is a method to pay the debt by first getting rid of your debt balance with the highest interest rate, in this strategy you make small payments for all debts monthly, however, your main focus is debts with the highest interest rate regardless of the balance amount.
The snowball method is one of the most sought debt reduction strategies, it refers to paying off debts in order from the smallest debts to the largest, calculating both the actual balance and the interest. This strategy allows you to gain momentum easily through smaller payments.
A balance transfer is a strategy and a process where you transfer the balance from your high-interest debit credit card to one or more credit cards with a lower interest rate. These strategies work best with the avalanche method. Basically what you will do is get a credit card with the lowest interest on the balance and start paying your debts within. This is to keep your credit card score good and help you dig into excessive credit interest.
Several individuals believe that paying your debts outright is the best financial strategy. Getting a personal loan to pay off debts may sound like adding up to more debt but it’s not. With the lowest interest rate personal loan you can pay your upcoming dues all at once and avoid late fees and higher interest rates. Moreover, since personal loans fall into the installment debts category, it wouldn’t look bad on your credit score.
The debt settlement method is based on few conditions but works well for people. This method is usually for people who are past their credit payment dues date but can afford to pay one large amount as a one-time settlement payment to the creditors.
In debt settlement, what you do is claim that you are unable to pay the amount with interest rate and agree on paying all that you can cover at the moment.
Bankruptcy is the last resort as paying off debts method when nothing else would work. Bankruptcy isn’t a happy to go method because it is devastating to your credit score. Bankruptcy is filed when you are unable to pay debts and managing them is creating hardships on you and your dependents. If paying debts means you have to pay a below living standard life then you can certainly apply for it through an attorney.
The above-mentioned strategies are based on the most liable method to the last resort. It is recommended to first try methods that would reflect well on your credit score. While planning out your debts, track your finances with a Guardian Wealth Management app.