debt solution - credit card debt image credit card debt, debt solution image

 


Share |



 Debt Solution Home
Credit Solutions
Calculators
Mortgage Calculator
Debt Payment Calculator
Compound Interest Calculator
Debt Payoff Software



 

Eliminate Debt Options

There are several approaches to systematically eliminating debt.

The first method is to pay off the credit card with highest interest rate first. Mathematically this debt solution makes the most sense in the long run because you reduce the total amount of interest paid and you get out of debt faster. People with discipline should use this method. The steps:

List all debts in ascending order from highest interest rate to lowest Pay minimum plus any extra amount you can afford on the debt with highest interest rate. Pay minimum on all other debts.

Then, add the old minimum payment from the first debt to the extra amount, and apply the new sum to the second smallest debt.

The second approach is to pay off the credit card with the smallest balance first then apply that monthly payment to the next debt in addition to any extra amount that you can afford. This debt solution is sometimes referred to as “snowball method”. You may have heard of this solution as it is taught by Dave Ramsey. This approach makes sense if you need that extra cash every month (cash flow). After having paid off the smallest debt, you will now have extra cash every month. There is a psychological benefit as well getting your debt paid down. You just feel better knowing that you have paid off one of your debts and that helps keep you motivated. The snowball method steps:

List all debts in ascending order from smallest balance to largest. This is the method's most distinctive feature, in that the order is determined by amount owed, not the rate of interest charged. However, if two debts are very close in amount owed, then the debt with the higher interest rate would be moved above in the list. Determine how much extra can be applied towards the smallest debt.

Pay the minimum payment plus the extra amount towards that smallest debt until it is paid off. Pay the minimum payment on all other debts.

Then, add the old minimum payment from the first debt to the extra amount, and apply the new sum to the second smallest debt.

Repeat until all debts are paid in full.

A controversial last step is to stop all retirement fund contributions to free up money for paying down the debt. Many argue that the cost of compounding interest to be greater than the gains of paying off debt. Some debtors compromise and just lower their contributions, to only match what the employer contributes to the retirement fund. Ramsey teaches that halting of retirement fund contributions should not last longer than two years.

The snowball method generally applies to revolving credit , such as credit cards. Mortgages generally aren’t included in the snowball debt method. By the time you get down to your last debts, the amount you can pay will have become much larger, similar to a “snowball” gaining momentum as it rolls down the hill packing on the snow.

The last approach is for those who are completely overwhelmed. Find a reputable company to help eliminate debts or at least reduce debt by lowering the payment amounts. 

To eliminate debt requires discipline but if you stick with it you can be debt free much faster. Each person should choose the best debt elimination strategy for their situation.

 

Have a debt related website? Link to us

Follow us on Twitter @Debtsolution_4u



Blog | Resources | About | TOS | Privacy Policy | Contact us


Helpful links :
Free Printable Calendar & Blank Calendars  |  Online Schools

2013  Copyright www.DebtSolution-Strategies.com 
2012 Copyright www.DebtSolution-Strategies.com - eliminate debt quick start