With so many different debt solution out there it can sometimes be confusing as to what would make a good pick to fit your needs. It certainly doesn’t help that thereis a lot of mis-leading information designed to confuse you, in the hopes that they can sell you a product even if it wont work. Here are the guidelines I would use when considering a debt solution to meet your needs.
First question you have to ask yourself is what do you want out of your debt solution? . Are you just looking to handle one particular debt, several accounts or are you attempting to eliminate all your debt.
Some debt solutions will suggest for you to just make more then your minimum payment , while this will certainly help you pay the debts faster… is it enough? If you only had one debt to deal with this may be sufficient for you, but there are more efficient ways to increase your debt pay-off. Not to mention that if you did this for more then account at at time you will be spreading your money too thin and hardly making a big enough dent on your principal. So if this was the suggestion of the plan that I was reviewing it would be put on the bottom on my list.
Another very popular suggestion from other debt solutions are to attack your highest interest rate cards first before your lowest interest rate cards. While this may seem like a good idea in reality it is not and here is why , if you look at your goal of trying to eliminate your debt. Lets just say for argument sake that we an extra 75 dollars that we are applying, you pay less off of the account with higher interest due to the interest rate, so does this really make sense..?. You only have so much money typically to apply so best put it where it will efficiently work FOR YOU ….NOT THEM . I would be wandering who benefits from this type of setup and who stands to gain more them or you. The only exception to this is an 0% interest rate card, if you know you will pay it off before the rate will increase then continue that path. But if the card has a time limit before it will increase you should apply everything you can towards that card as it subtracts 100% from your principal. The benefit there would be that you have the possibility of paying it off, giving you the amount you were paying on it to use towards another card.
Now for the last debt solution that I am going to discuss today involves a systematic approach to eliminating your debts. Not knowing what you have to work with we will use and example I have created for demonstration. In this example we have three credit cards, a car payment, and a first and second mortgage. We will not even be looking at the mortgages or the car for the moment,, just keep making the minimum payments on those for now.
But here is how you would handle the credit cards and the reasoning behind handling them this way. Using your favorite spreadsheet program or paper if you prefer, line all your debts up from the lowest balance to the highest. You would continue to pay the minimums on the two above the one with the lowest balance, as the minimums decrease add that amount to the one with the lowest balance. Funnel all that you can towards that debt first, any funds above your minimum should be made as an extra payment on the first day that your credit card posts for the next month. Let me explain that so it is clear why… lets say you have 50 dollars extra consistently not including the reductions on the minimums of the other cards, which you would add to this amount. If you apply it on the first day of next months billing period you will reduce your interest charges for approx 28ish days for the amount you have lowered your balance. This will have a big advantage for you as it will one lower your interest costs immediately and apply more towards principal. these two things in combo will dramatically reduce how long it takes to pay off that debt, once you are done you can then roll that amount back up towards the next debt , except you will now use that full amount to pay as the extra amount on the first day of that billing statement, once your credit cards are gone attack your car then your second and first mortgages. If you are motivated you can easily pay off everything you owe in 7-10 years, which beats 30 years assuming you don’t do a debt consolidation along the way.
Well I hope that this information has been helpful to you .
Post provided by: http://www.debt-elimination-services.net
