Debt: the four-letter word which can haunt you or make you feel free. Whatever it makes you feel like, just know that you have the power to control it.
Regardless of the task at hand, every good plan always starts with a good strategy. Today, we will introduce three different strategies to help you reduce your debt burden and set you on the path to financial freedom.
The fastest way to roll a big snowball is to build a small one and roll it on the ground and let the speed and momentum create a bigger one – this is exactly how the debt snowball method works. Start off by paying off your smallest debt first. Once this is done, you move onto your next biggest debt and continue working your way until your reach your largest debt.
This method works because the satisfaction gained from seeing each debt being paid off, and that snowball growing bigger at the same time, will keep you engaged and motivated. Once the snowball starts rolling, it’s hard to stop!
This method involves starting with paying off the debt which has the highest interest – which may not necessarily be the debt with the greatest rand amount. A higher interest rates increases the amount which must be repaid over time so getting rid of this one first may take a longer time but will reap its rewards in the long term.
This method reduces the interest you pay and reduces the amount of time it takes for you to reach zero debt but it does require a long-term commitment.
This method involves paying off your debts through one new loan. The money from the new loan which you have taken out will be used to pay off your debts – and you then pay monthly amounts as loan repayments to the financial institution which you have taken out the new loan from.
The method involves pooling all of your debts into one single loan which makes it more manageable and easier to track. It helps to reduce the number of creditors you have to one so you can easily manage how much you are paying back towards your debt with one single amount.
It’s important to take note that you still need to allocate the minimum amount to all of your debts in all of the abovementioned scenarios. If you miss a payment to your creditors, this will negatively affect your credit score.
Keep an eye on our blog as we unpack these various scenarios over the coming weeks!