Three Strategies to Pay off Debt
It can take just a few months of unemployment, a shopping habit, or a medical emergency to feel like your finances are out of control. No matter how you got into debt, there are proven strategies to dig yourself out.
The Debt Avalanche
This strategy helps you prioritize how much to pay and when. Start by listing your debt payments from highest to lowest based on the interest rate – the cost of borrowed funds. Then work on paying off the highest-interest debt first, making the minimum payments on all other debt. According to Forbes, this method minimizes the amount of interest you pay, thereby giving you more cash to pay other lingering debt down. This strategy continues until all the debts are paid off. It is best for people trying to pay off debt quickly and lower the amount of money they must pay in interest.
The Debt Snowball
If you find satisfaction in checking items off your list, the debt snowball strategy may be for you. Start by listing all your debts from lowest to highest. Then, focus on paying off your smallest debt first, making the minimum payments on all other debt. After the smallest debt is paid off, you move on to the next smallest one. The debt snowball method is said to increase your motivation by providing small victories along the repayment journey.
Pay More than the Minimum
Any easy way to consistently save money on interest is to pay more than the minimum payment due. Consistently making extra payments will help to pay off your loan more quickly while minimizing interest expenses. For example, when you always use your credit card, if you only pay the minimum amount, you could spend almost 2x the amount due to interest.
Want to learn more? Contact one of our Bank associates or visit one of our branches to determine what strategy would work best for you. If you are looking for lending options, speak with the team that always puts you first.