Pay this debt off first, because when that introductory period ends, you will be on the hook for all the debt you consolidated.ĭebt consolidation loan: If you have other debts in addition to your credit card debt, you can look into debt consolidation loans. Note: The 0% introductory rate on a balance transfer card is the exception to the avalanche method. If you're able to pay off your debt within that promotional period, you have the potential to save a lot of money on interest. The best balance transfer cards also typically come with a 0% introductory APR that can last up to 21 months. You'll have to pay a transfer fee that's usually 3% to 5% of the total balance transferred, but it'll be worth it in the long run. There are two main ways you can do this:īalance transfer credit card: A balance transfer card allows borrowers to consolidate various credit card balances onto a new credit card, ideally one with a lower APR. If you have debt on multiple credit cards, you may consider consolidating your balances into one so you can make a single monthly payment. There's no guarantee that they'll give you a reduced rate, but you'll be more likely to get it if you make you've consistently made on-time payments. Most people don't know you can call your credit card issuer to ask for a reduced APR (annual percentage rate), which can make a difference of hundreds of dollars in interest payments. Ask your credit card issuer for a lower interest rate There are debt management apps like Tally that optimize your payments with a specific goal in mind, like paying off your debts as fast as possible. Focusing on paying off the most expensive debts first can speed up the entire repayment process as you save money on interest. Once you've made all your minimum payments, the avalanche payment method concentrates any extra funds toward the debt with the highest interest rate. One such strategy is the avalanche method, which focuses on paying off debts as fast as possible. Once you've got an idea of all your outstanding balances and made all your minimum payments, you can strategically distribute extra funds money across all your debts. Missing any of these, particularly missing your payments by over 30 days, will put you in credit delinquency, which can hurt your credit score and stay on your credit report for up to seven years. Make your minimum paymentsĪt the bare minimum, you should be setting aside enough money each month to make your monthly payments. Ideally, once your budget is laid out, you'll see how much money you can devote toward paying off debts. It may be worth your time to look into budgeting plans that divide your take-home income into sections like the 70-20-10 budget or the 50-30-20 budget. While you're in repayment mode, avoid taking out another loan or using credit cards, unless you can absolutely afford to pay off the balance at the end of the month.Ĭutting off credit card spending can be a challenge. Taking on more debt while you're trying to repay a load of other debt can complicate things. This can be an intimidating exercise for people with a lot of debt, but there's no way to make a clear plan for tackling it without a hard look at the numbers. Google Sheets - or a simple pen and paper - can be an invaluable tool for keeping track. This means keeping identifying all outstanding balances, their interest rates, any minimum payments, and payment due dates. If you have multiple sources of debt - say several credit cards, student loans, and a personal loan - the first step to paying off debt is determining how much debt you have to pay off. Here's how you can become debt-free fast. With these consequences laid out, it's clear that the faster you pay off your debt, the better. If you're holding too much debt on your credit cards specifically, more than 30% of your overall limit, you can also hurt your credit score, making future borrowing more costly. The more debt you have and the longer you hold it, the more expensive it becomes with interest constantly eating at you. While this is a problem that many people share with you, it is still a problem nevertheless. The average American carries $52,940 in total debt. Most of us don't have immediate access to cash to pay for everything we want, so we borrow money in the form of credit cards, loans, or mortgages. By clicking ‘Sign up’, you agree to receive marketing emails from InsiderĪs well as other partner offers and accept ourĬarrying debt for too long - even if you're leveraging it to grow your wealth - can quickly begin to feel like a burden.
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