How to pay off debt fast, is a common worry most have.
There are many written ways on how to save money that has been advocated as the best practice but do they really cause a snowball effect or make small ripples.
This article is going to showcase best ways to save money that cause a snowball effect.
When it comes to saving, you still need a penny to make a $100, that being said we are going to examine how to make that $100 work harder for us.
1. Types of Debts
There are different types of debts such as
- secured or unsecured debt
- good debt vs bad debt.
- consumer debt – student loans, credit card,
Regardless of which debt it, there is a steep amount of interest that has to be paid and this decreases your disposable income.
2. Snowball Debt Payoff
Paying one monthly installment at a time will cost you more than the debt you borrowed in interest and unfortunately, this can create a lifetime of debt. A snowball debt payoff process enables one to quickly eliminate debt and in the process saving money by avoiding to pay interest. Below are some top methods to snowball debt process.
3. Get Free Debt Counseling
If you do not know the rules of any game, you will get penalized or kicked out altogether. The same principle is applicable to finances. It is very imperative to become financial literate regarding your financial situation. For instance, you may be able to lower your monthly payments if you consolidate debt. This is one of the best ways to save money on a tight budget because it aggregates all your debt and generate a lower monthly payment, therefore, you can add more to your principal. It is extremely important to understand the kind of debt you have.
If you have credit debt. therefore, take the time to study how others have paid off their debt or what tools on the market that can be helpful.
4. Check Your Credit Report
This is one of the most important factors when it comes to borrowing money. Your interest rate is tied to your credit score. the better it is the lower your interest rate. Before borrowing or applying for any credit, you need to check your credit score for any errors. This allows you to dispute any mistakes and have them correct it. The credit score is tied down to your creditworthiness that will impact your interest rate. There are few ways you can implement to increase your credit card score, this helpful, especially for big purchases.
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5. How to Pay Off Debt – Student Loan
Student loan forgiveness many of us graduate with high student loans and entry positions that can barely pay the rent. There are different options you have that student loan forgiven.
- You may look into participating in public service / federal government, work for an employer with student repayment plan or non-profit in order to get your debt forgiven
- Any extra payment you make, request it to be applied to your principal amount. If you do not specify this, they will let the payment sit on your account and apply it on the due date. If they use the due date, then you will have accrued interest and this defeats the purpose
6. How to Pay Off Debt – Credit Card
Paying off only monthly payment for your credit card statement is not the best way. This method will make you pay more interest and a lifetime of high monthly payment. To effectively pay off any loan you have to be more creative.
- The best plan is to Pay off credit cards in full each month
- Pay off the credit card with the highest interest rate
- There are many credit cards that offer balance transfer. This can be a great tool if you use it correctly (stated above – take the time to educate yourself about your current debt)
- Use the New Card with 0% interest rate to pay the Old Card with the highest rate – this eliminates you paying interest and focus only on paying the principal.
- If you are able to get New Cards with 0% to pay off your balance, then do so. Your goal is to pay off debt faster with no interest payments
- SNOWBALL YOUR PAYMENTS – now your credit card payment has no interest on it (for a specified amount of time) take the time to pay it off as soon as possible
- Be mindful of the fine print and make sure you do not increase your debt
A $1,000 debt reduction will probably save you $150-200 a year in interest, and much more if you’re paying penalty rates of 20-30 percent
7. How to Pay Off Debt – Mortgage
There are many ways to pay off your mortgage that have been well documented. Below are some additional unique actions to make extra payments
- Remove your PMI once your loan-to-value has decreased
- Make an extra payment of $1000.00 towards the principal every year,
- Always refinance your mortgage for a lower rate, banks are not the only institutes that re-finance, research and look for competitive lenders
- Pay your mortgage every two weeks – this reduces the amount of interest and more goes to the principal
- Credit Card – use the same 0% credit card method stated above to pay your mortgage. This allows you to borrow free money with no interest.
The only way to increase your nest egg and is to have more disposable income that you can fund your investments. One of the biggest debt that we carry is consumer debt which is usually accumulated in financing wants.