Looking to get ahead or out of debt? Did you know that paying your debt properly can reward you with savings? That’s because there is a proven method and way to paying your loan debt that is guaranteed to save you thousands over the course of payment periods.
Money experts state two principle strategies to paying loans debt — the high interest method and the debt-snowball method. When speaking about the debt-snowball method we are speaking about paying off the smallest debts first, with no regard to interest rate charges on accounts. Trying to get ahead using this method however, ends up having borrowers pay more interest.
Alternatively, the high interest method involves paying off debt with the highest interest first, whether it’s credit cards or personal loans. This method helps borrowers save money on remaining balances and can help them minimize the interest paid. A good rule of thumb is to always pay the debt with the highest interest.
Paying the minimum on a credit card costs borrowers more in the long run and offers no clear benefit at the end. For example, a debt of $5,000 at an 11 percent interest rate will take the borrower upwards of 15 years or more to pay off the card when only making the minimum repayments and would add on several thousands of dollars in interest over the life of the card.
Achieving a good financial position will require strategizing and prioritizing your loans, credit cards and other debts.