Wether you are in the Military or a civilian everyone gets into debt from time to time. Debt can vary from a modest credit card balance to a crushing school loan or owing the IRS. While each type may have it’s own issues the basic principles of getting out of debt are the same: paying down the debt while not adding new debt. Below are some of the ways you can get pay off your debt and get out of that vicious cycle of just making the minimum payments.
Getting out of debt starts with solid planning. Before you jump in and tackle your debt you need to know what resources you have. How much money do you have each month to put towards paying down your debt? You should start by creating a budget.
Next, stop digging that hole. You can’t get out of debt if you keep using your credit. Put the cards away in a safe place and don’t use them until you have your debt settled. If you have credit cards on file with online retailers then delete that info. It’ll help reduce the temptation to spend money you don’t have.
No matter that method you decide make sure you always pay more than the minimum. You’ll never get out of debt paying just the minimum. You’ll rack up fees and interest and end up paying many times what the original debt was. This is one of the most important factors in paying off your debt.
The Snowball Method
This method is popular for a good reason. If you stick to the plan it really does work. The basic idea of the snowball method is to pick your lowest debt and pay it off as fast as you can. Pay more than the minimum payment and pay it off. Once that firs debt is paid off, take your second highest debt and combine the payment for this debt with the one you just paid off. The combined payments will pay off this card even faster. Once this one is paid off you do the same with the third debt and so on. You’ll find you are paying off your debts faster than you thought possible. You’ll also avoid quite a bit of interest using this method.
Some credit cards or accounts off a zero interest balance transfer option. These can carry some risk if you don’t pay down the debt in the time they give you when you do the transfer but it can save you a serious amount of money on the interest. This option is best if you you have a smaller amount of debt.
This method can be especially helpful if you have a high interest credit card and you can get a loan that rolls all your debt into one with a lower interest rate or fixed rate. Many credit cards or loans have high interest rates or fluctuating rates that make it difficult to plan your payments. Rolling your debt into one loan with a lower rate can help you reduce your interest rate and pay less in the long term.
Get a Loan
It can be tough to use this method if you are already in debt but a loan may be an option if you can get a low interest loan. You may have the option to borrow from your 401k, Life Insurance or Home Equity. All of these have risks and you are essentially borrowing from the future. But with a low interest loan you can reduce your overall debt and end up saving money. As with any loan, make sure you pay more than the minimum payment to get it paid off quickly to avoid fees and interest. Use our free Loan Calculator to get an idea of how much you could save.
If you take away one piece of advice for paying off your debt let it be this: always pay more than the minimum. If you just pay the minimums you’ll likely have that debt for years racking up fees and interest at an alarming rate.
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