The holidays have passed, the most wonderful time of the year has gone, and you find yourself only with happy happy memories… and added debt. As if that didn’t put enough of a damper on things, you’re having more and more trouble paying it off. No one should have to deal with debt after the holidays — especially since they’re supposed to help you relax and lift your spirits after having worked hard all year! That’s why, below you’ll find helpful tips for paying off that pesky holiday debt!
Choose a Debt Payoff Method
Once you’ve made the decision to confront your debt head-on, the next step is to choose your debt payoff method. There are many debt payoff methods, but the two most common ones are the avalanche method and the snowball method. Although both have their benefits, the one that is the most beneficial in terms of paying less in the long run is the avalanche method. On the other hand, the one that has the most psychological benefits is the snowball method. Keep in mind that as long as you’re paying off your debt, you’ve made the right decision, whatever method you ended up choosing.
The avalanche method involves tackling (or putting more money towards) the debt that has the highest interest rate. The reason you’d want to do this is because, the more you put on that debt, the faster your interest will decrease. And the more your interest decreases, the less you’ll have to end up paying in the long run. While you’re focusing your payments on the card with the highest interest rate, don’t forget to pay the minimum payments on your other cards.
The snowball method is the opposite of the avalanche method. Like the name of the method suggests, it involves tackling the smallest debt. Although you may not see any financial benefits to this like you would for the avalanche method, the snowball method has some great psychological benefits. Because you’ll be paying off one of your balances at a much faster pace than you would with the avalanche method, you’ll be feeling a lot more accomplished, which will give you the motivation you need to keep going!
Consider a Balance Transfer Card
A balance transfer card is a great choice for those that have to deal with very high interest rates. What’s great about balance transfer cards is the they usually come with a promotional period that offers 0% interest for the first twelve months. That would save someone a lot in the long run if they have high interest rates on their debts. There are, however, a few things to consider before making the decision to get a balance transfer card.
- If your debt will take you 3 months or less to pay off, it’s just not worth it. That’s because balance transfers will typically charge a balance transfer fee, and that fee might exceed what you’d end up paying in interests for 3 months.
- Likewise, if you have a lot of debt, it might not be worth getting a balance transfer card for. Balance transfer cards typically won’t cover a high amount of debt, and will only let you transfer a small portion of it.
- If you have a bad credit score, or a credit score below 650, you might not be able to be approved for a balance transfer card.
Follow your Budget
No matter what debt repayment method you choose, the one thing that will ensure that you pay it off completely is to follow a budget. By following your budget, you can be sure that all of your payments are made on time, and you can track exactly how long it will take to pay it off completely. It also lets you know exactly how much money you have coming in and out of your account, so you can be sure to never let things get out of hand. Creating a budget is the very first thing you should do after choosing your debt repayment method. After that, all you need to do is follow the plan and make adjustments when necessary.
If you’ve looked into all kinds of debt repayment methods, have made countless budgets, but still can’t manage to see the light at the end of the tunnel, get help from a licensed insolvency trustee as soon as you can. Your LIT will show you more ways in which you can rid yourself of your debts, so that you never have to carry that financial burden again.