Antonio . Say you owe :
• $ 10,000 at 9 % interest to Creditor 1 .
• $ 1,000 at 13 % interest to Creditor 2 .
• $ 5,000 at 22 % interest to Creditor 3 . If you have $ 600 a month to put toward your debts and you send $ 200 a month to each creditor , it will take 5 years and 3 months to pay off what you owe plus interest , which will total $ 20,364 , Mancias says . This assumes once you pay off one credit card , you shift that $ 200 monthly payment to another credit card .
If , instead , you made the minimum monthly payment on the 2 lower interest debts -- $ 150 on the $ 10,000 debt and $ 15 on the $ 1,000 debt -- then put the remaining $ 435 toward the $ 5,000 debt that you ’ re paying 22 % interest on , you ’ ll be debt-free in 2 years and 7 months and will have paid $ 18,452 in total .
“ The key to this strategy is to maintain the $ 600-per-month debt payment throughout ,” Mancias says . “ So , once one card is paid off , you don ’ t eliminate that payment , but instead roll it over to the next card to accelerate the payoff .”
Who this strategy is good for : Those motivated by interest savings .
2 . THE ‘ SNOWBALL ’ METHOD If you ’ ve ever listened to “ The Dave Ramsey Show ,” a popular personal finance radio and online program , you ’ ve heard Mr . Ramsey , the host , advocate the debt “ snowball ” method of repayment . Taking this path , you pay off your debts from smallest to largest .
Getting a debt completely paid off in the shortest time possible creates confidence and a sense of hope that pushes you to stay on track .
Similar to the avalanche method , you make the minimum monthly payment on each debt except the one you ’ re focused on paying off . Once you ’ ve repaid it in full , you focus on the next debt on your list .
Paying the most expensive balance first might be the cheapest way to get out of debt , but if you don ’ t have the patience for this method and don ’ t stay with it , it won ’ t work .
Who this strategy is good for : Those motivated by small successes .
3 . DO A BALANCE TRANSFER If you have good-to-excellent credit despite your debt -- which is possible
30 HimPower August 2017