Tackling debt can be incredibly overwhelming. Fortunately, there are a few strategies to make your repayment journey easier.
This strategy focuses on debt reduction by paying off your balances from smallest to largest. Once you have allocated funds for minimum payments on all of your debts, the remaining available funds will go to your smallest debt. Once it is paid off, you’ll move on to the next smallest, and so on.
A debt avalanche is a repayment strategy in which the individual focuses on knocking out debts with the highest interest rates first. Once you have allocated funds for minimum payments on all of your debts, the remaining available funds go to the debt accruing the most interest. If you have multiple debts with high interest rates, this approach could save you the most money.
Another approach to debt management is consolidation. This includes combining multiple debts into a single new one, ideally at a lower interest rate to save money. Having only one monthly payment can make your debt more manageable and shorten your payoff period. There are a couple of ways to consolidate debt including personal loans, balance transfers or home equity lines of credit (HELOC).