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Paying off multiple debts at the same time is an overwhelming task. If not handled appropriately, it might take years for you to repay them.
The longer you take to repay them, the more interest rates you end up paying. Prioritizing them is important if you want to make a significant dent in your debts without going fully broke.
Methods to Guide You Over the Repayments
While handling debt payments, it’s imperative to plan and ensure your basic living expenses are covered. We’ve mentioned some useful methods you can use while listing down which debts to cover first:
Highest Interest First
As the name suggests, you pay the debt with the highest interest rates first. These repayments will cost you more in the long run, and hence should be prioritized. This doesn’t mean you should ignore all your other debts.
You should list down all your debts according to their interest rates. Pay a minimum amount for all of them, but try to repay as much as you can for your debts with the highest interest rates. This is a suitable method for people who have fewer debts with high-interest rates.
The Snowball Plans
This is the opposite of the high-interest first method. In this method, you can prioritize your smallest debts first while making minimum payments for all the debts. Once the smallest debt is paid off, use that amount on your next small debt.
This method is suitable for people who have a lot of small debts with manageable interest rates. This is a quick method of tackling all your debts efficiently. It’s also great for people who get overwhelmed by the bigger debts and intend to focus on the smaller debts first.
Managing your debts isn’t always a straightforward and logical process. Sometimes, our emotions detect which ones we repay first.
Maybe there’s a debt that’s making you more anxious and you’d like to take care of that first? Or is it a loan you took from a friend or family member that you feel obliged to repay first? If that’s the case with you, go ahead with it. As long as you are aware of your basic living expenses, you will do fine.
If you are unable to pay off all your debts within 5-6 years or have debts with high-interest rates, then you might find this method beneficial.
This is a rather uncommon method because it involves getting new finance to pay off all your debts. You can check out cash1loans.com to explore the different types of Personal loans available for consolidating your debt.
It is a suitable method if all your debts are on a credit card; you can use a balance transfer credit card to settle all debts. This will take care of all your debts while you will only have to pay for the balance transfer card or the loan you took.
Find a Method That Works for You
Eventually, everything boils down to the two major aspects: money & its management. There’s no one-for-all solution when it comes to paying debts. Knowing and understanding these methods might help you efficiently prioritize your finances.
Whether you have a lot of big debts or a bunch of smaller ones, Utah Instalment Loans has various options to help you out.
From a line of credit, personal loans, title loans, and installment loans, you will find an option best suited to your specific financial circumstances.