Do you still get some debt that might stop you from enjoying the holidays? Do your loan payments hold you back from achieving a bigger financial goal?
Here are the top 3 ways to pay off your debt fast so you can enjoy your finances to the fullest:
1. Start By Paying Off High-Interest Rate Loans
The general rule of thumb when it comes to debts is to make it your top priority to pay down those debts that come with the highest rates of interest. Through this particular strategy, it will be possible for you to pay off your debts faster with lesser overall interest down the road.
To make it possible, you might want to make minimum payments on the rest of your accounts with lower interest. Then, once you have paid off your highest interest rate loan, you can now apply this minimum monthly payment that you would have otherwise spent on the highest interest rate loan to your next loan with the highest interest rate. This cycle continues until you manage to pay off everything and be free from debts completely.
2. Go for Biweekly Payments
A very popular strategy to speed up debt repayment is through making biweekly payments or every two weeks wherein each totals half of your payment every month. One important thing to remember is that this particular method means you need to make a total of 26 payments every year that is twice more than you will make if your payments are made every first day and middle of the month. This is why it is a must that you budget accordingly.
One significant advantage of this is that you can lower the amount that you owe at a faster rate that will allow you to save on interest. A biweekly schedule can also lessen your cash flow concerns as this will result in an even distribution of smaller payments for the whole month.
3. Loans with Smallest Overall Balance Should be Your Priority
Another good strategy for repayment that you might want to try is known as the debt snowball method. With this particular method, the main idea is for you to pay back the loans with the least total balance first before redistributing the money that you might have spent on these payments to the rest of your larger loans. Getting rid of your smaller debts as fast as you can help you maintain your motivation to continue paying off your bigger debts. Once done correctly, this can lead to a faster period of repayment and less overall interest paid.
Bonus Tip: Pay Your Debt in Lump Sum
If you are in luck and you received a nice bonus check that you don’t know how to use, you might want to make a single large payment for your debt, whether it is your mortgage, credit card debt, or auto loan.
Once you have paid off your debt, your money will give you a guaranteed return and this is the amount of interest that you would have otherwise paid on your outstanding balance.