Antonio. Say you owe:
• $ 10,000 at 9 % interest to Creditor 1.
• $ 1,000 at 13 % interest to Creditor 2.
• $ 5,000 at 22 % interest to Creditor 3. If you have $ 600 a month to put toward your debts and you send $ 200 a month to each creditor, it will take 5 years and 3 months to pay off what you owe plus interest, which will total $ 20,364, Mancias says. This assumes once you pay off one credit card, you shift that $ 200 monthly payment to another credit card.
If, instead, you made the minimum monthly payment on the 2 lower interest debts-- $ 150 on the $ 10,000 debt and $ 15 on the $ 1,000 debt-- then put the remaining $ 435 toward the $ 5,000 debt that you’ re paying 22 % interest on, you’ ll be debt-free in 2 years and 7 months and will have paid $ 18,452 in total.
“ The key to this strategy is to maintain the $ 600-per-month debt payment throughout,” Mancias says.“ So, once one card is paid off, you don’ t eliminate that payment, but instead roll it over to the next card to accelerate the payoff.”
Who this strategy is good for: Those motivated by interest savings.
2. THE‘ SNOWBALL’ METHOD If you’ ve ever listened to“ The Dave Ramsey Show,” a popular personal finance radio and online program, you’ ve heard Mr. Ramsey, the host, advocate the debt“ snowball” method of repayment. Taking this path, you pay off your debts from smallest to largest.
Getting a debt completely paid off in the shortest time possible creates confidence and a sense of hope that pushes you to stay on track.
Similar to the avalanche method, you make the minimum monthly payment on each debt except the one you’ re focused on paying off. Once you’ ve repaid it in full, you focus on the next debt on your list.
Paying the most expensive balance first might be the cheapest way to get out of debt, but if you don’ t have the patience for this method and don’ t stay with it, it won’ t work.
Who this strategy is good for: Those motivated by small successes.
3. DO A BALANCE TRANSFER If you have good-to-excellent credit despite your debt-- which is possible
30 HimPower August 2017