There are few approaches to paying off multiple debts and becoming debt-free.
Depending on who you are and what is your current situation you will be able to define which approach would be the Fastest way to pay off your debt.
Getting out of debt might be not so easy, especially when you have few of them, when some of those debts (if not all) have high interest rates and when you just don’t earn enough to pay them off, so you borrow more to pay your bills, but you are ending up in a bigger debt.
Apart from the financial side there is also an emotional side to it.
Having a debt can be very oppressing. But before we get to the 3 main approaches to get out of debt, let me just encourage you – you are not alone, there are many people around the country and around the world with the similar situation, and this is not the end of the world.
You might also find this article useful: How to get out of debt on your own.
I’ve been there too, I’ve had bigger debts and smaller debts, sometimes I felt like I am losing the ground, felt like I will never get out of this debt circle, when I had to borrow to pay my debts, jumping from one debt to another, from one credit card to another. My biggest debt was 25000 dollars, which might not seem too big for you, but at the time I was earning around 1000 dollars a month (I used to live in Ukraine) so for me it was huge.
But if you are committed to becoming debt free, I can encourage you – it is possible. You CAN deal with your debt, even though it might take some time and additional efforts. There is no quick simple solution that will make you debt free in one week, but there are certain tools that will help you to build your way to freedom.
Today I will share with you 3 main approaches to dealing with multiple debts.
The Approach #1. Start by getting rid of the smaller debts.
The idea of this approach is to help you to get to a better emotional state quickly. When you have 5, 6 or 7 different debts it might be overwhelming, might be just too much to handle, so you start losing the emotional strength and energy to cope with it. With this approach you pay off the smallest debts quickly, so you just don’t have so many of them. It’s easier to cope when you have only one or two bigger debts left. It’s not the best approach from the financial point of view, but it helps you to stay healthy emotionally.
The Approach #2. Prioritize the debts with the highest interest rates
If you have the debts with the high interest rates like 15% or 20%, it’s good to prioritize them and try to pay them off as quickly as possible. The math is simple – the quicker you pay them off, the more money you save on paying the interest. There are also tools that might help you to minimize your interest rates. For example, you can use balance transfer credit card to pay 0% interest instead of 15 or 20%.
This is how it works. The Credit Card companies want to attract new customers, and they give you the special conditions if you move to their credit card. They charge you 0% interest rate for 12 or 16 months if you transfer your balance (other words your debt) from another credit card to their credit card. It gives you more time, and, instead of paying the interest rate, you can pay more of your actual debt. However, you should do some research and count everything before you pick a balance transfer credit card – some companies charge you one-time fee for the balance transfer, so make sure it still makes sense in your particular case.
The Approach # 3. Consolidate your multiple debts into one
If you have multiple debts with different interest rates and different payment dates it might be difficult to manage and control. You may easily miss some payment and get additional charges, which you don’t want. A good solution would be to consolidate all your debts into one loan with one fixed monthly payment. It will be much easier to track, you will know exactly when you will pay off your debt, and additionally, if your credit score is good enough, you may get a lower interest rate on your consolidated debt.
Thanks for reading! You might also find this article useful: How to get out of debt on your own.
I wish you all the best, have a great week, and see you soon!