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“I am a big fan of the snowball method because it gives you quick wins at the beginning that help you get motivated and stay motivated to get out of debt.” In all, we have paid off over $260,000 in debt,” says Stacie Heaps, personal and family finance writer at Families for Financial Freedom. “My husband and I used the snowball method to get completely out of debt, including our mortgage. If you know that seeing immediate progress is necessary for you to continue, the snowball method might be an excellent option. It works by the same principle as the avalanche method, but instead of focusing on high-interest credit card debt, you concentrate on paying off the cards with the lowest balances first.įor example, if you have one credit card with a balance of $2,000 and an 18 percent APR and another card with a $750 balance and a 14 percent APR, you would pay the second credit card down first because it has a lower balance, even though it also has the lower interest rate. If you’re worried this might make you lose motivation, consider using the snowball method. You may feel like you’re spending a big chunk of your income trying to eliminate it, yet all your accounts are still showing a balance. Paying off credit card debt can be mentally exhausting. Then, when you’re finished paying off the card with the highest interest rate, move to the second-highest APR and repeat until you’re fully rid of credit card debt. Missed payments and unpaid debts will remain on your credit report for seven years. Make sure you’re still making minimum payments on your lower-interest credit cards as well, to avoid late fees and damage to your credit. “This method works well for disciplined people who want to be debt-free with the most effective strategy,” says Kuka. It saves you money in the long run to eliminate the most wasteful recurring payments first. “So, if you have one credit card with a 15 percent interest rate and another with an 18 percent interest rate, you would pay off the debt accumulated on the 18 percent credit card first,” says Freya Kuka, founder of the personal finance blog Collecting Cents. It focuses on paying off credit cards with the highest APRs first to save as much as you can on interest. The avalanche strategy is a popular way to eliminate credit card debt. Here are some strategies to pay it off and get your financial life back on track. If you’ve found yourself struggling with credit card debt and are worried it’s impacting your credit, don’t panic - there’s a way out. As a lending product, they will cost more in interest than any other financial product.” “Credit cards are only meant to be used as a short-term vehicle for borrowing against your cash flow. “It’s important to reduce credit card debt … because credit card interest is compounded daily and can cause your financial growth to remain stagnant,” explains Dino Selita, president of The Debt Relief Company. That’s usually not the case, however, with credit cards.
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Certain low-interest debt, like student loans and mortgages, can be an investment that will increase in value and generate income in the long-term. Debt, in and of itself, isn’t always a bad thing.