Are you someone who’s facing monstrously huge credit card balances? If you’ve misused your cards to the fullest, you should be aware of the fact that you’ve dug your own grave and that you have to face the consequences with the same enthusiasm that you’ve had while using your cards. Credit cards are the most amazing financial tools through which you can purchase things that you can’t afford with cash.
Although this might seem to be the best option at hand to bag all the things that you like, you should always remember that this is the way in which you actually start digging your own grave. Credit cards carry outrageously high interest rates and therefore it should be always avoided but how many of us are aware of this? We keep on misusing our credit cards and ultimately realize when we’re up to our eyeballs in credit card debt. Here are some debt solutions that can help you get back on track and stay on top of your finances.
The debt snowball method: When it comes to paying high-interest debt, we should be more concerned about modifying our behaviour than making some calculations. According to Dave Ramsey, the best debt solution is ‘debt snowball’ which involves repaying debts from the smallest principal amount to the largest, irrespective of the interest rate that it carries. If you can pay off the first debt quickly, you can start devoting the same amount of dollars to the next debt. However, make sure that you keep on paying the minimum monthly payments on all the other accounts apart from the one with the smallest principal amount.
The debt avalanche method: Although some experts and analysts are of the opinion that the debt snowball method is the best way of repaying your debts on your own, there are some others who feel that the debt avalanche method is better. Although the former might satisfy your emotions, the actual effect can be seen through the debt avalanche method. When you choose this option, you start paying off the highest-interest debt at first and then the next account with the second-highest interest rate. Here too, you have to ensure making the minimum monthly payments on all the other accounts.
Opt for a balance transfer: If you don’t have a too bad credit score, you can opt for a balance transfer card that offers a nominal interest rate. The balance transfer cards carry lower rates through which you can reduce your monthly payments throughout the term of the loan. However, you have to make sure that you transfer the entire balance to the new card within the completion of the introductory period so that you can reap the benefits of lower monthly payments, lower interest rates and saved amounts.
Keep growing your emergency fund: 35% of Americans have 0 dollars in their retirement savings and with these statistics, it is pretty easy to derive to the conclusion that Americans are not at all well-versed in the habit of saving money. So, if you want to see yourself out of debt, you should always try to grow your emergency savings account. Keep aside at least 10-12% of what you earn, irrespective of the amount that you earn.
Therefore, when you’re wondering about the different debt solutions through which you can repay your debts and secure your financial life, you should take the above mentioned tips into consideration. The sooner you trigger off your debts, the sooner you can boost your credit score.
