Paying off your credit card and loans does not have to be an intimidating task – it will require some patience, management, and planning. Being free of debt is beneficial for multiple reasons, like not worrying about this financial obligation anymore. Besides, paying off your debt allows more space for pursuing other financial goals. The following text will highlight the best ways to eliminate debt efficiently and the best way to pay off credit cards to improve credit score.
Avoid making the minimum payment on your debt
Try to make it a habit to make a payment that is at least slightly higher than the minimum requirement. Minimum payments usually cover solely the interest attached to the debt, thus resulting in minimal reductions to your principal balance. Your debt accrues more interest attached to it the longer you stretch out paying off your balance. This is why you want to ensure that you are making payments that are high enough to reduce the actual debt that is owed.
Reduce leisure spending
It is imperative that you prioritize paying off your debt over all other spending intended for leisure activities. Additionally, try to cut back on all other unnecessary expenses by using methods such as packing your lunch for work rather than eating out and bringing your own coffee/tea with you. It is also a good idea to avoid the temptation of spending more money off your card by getting rid of it.
Try arranging a lower interest rate with your lender
Consistently following these suggestions for paying off your credit card debt will ensure that you make reliable payments. In this case, it may be possible to arrange with your credit card company to have your interest rate reduced. High-interest rates benefit the credit card company rather than increase the speed of paying off your debt.
How to Pay Off Credit Card Debt?
Ready to pay off your debt? The first step is to create a debt payoff plan.
If you only have one debt, your strategy is simple: make the biggest monthly debt payment you can handle. Rinse and repeat, until it’s all gone.
But if you’re like most people in debt, you have multiple debts to manage. And in that situation, you need to find a method that appeals to you.
Many people turn to the strategies often exhorted by financial guru Dave Ramsey: the debt snowball and the debt avalanche. We’ll explain both of those below, as well as alternatives like balance transfers, personal loans, and bankruptcy.
Pay Off Debt With the Avalanche Method
We recommend using the debt avalanche method since it’s best way to pay off multiple credit cards when you want to reduce the amount of interest you pay. But if that strategy isn’t right for you, there are several others you can consider.
The debt avalanche will help you pay less in interest — and will get you out of debt more quickly. You’ll also have the satisfaction of seeing the highest interest rates disappear.
That’s why the debt avalanche is our recommended method for paying off debt.
Pay Off Debt With the Snowball Method
The downside? It’ll generally take longer to see progress than with the debt snowball. So if you’re counting on some small wins to get you motivated, the next method may be a better fit for you.
With the debt snowball, you’ll pay off your debts in order from the smallest balance to the largest.
Many people love this method because it includes a series of small successes at the beginning — which will give you the necessary motivation to pay off the rest of your debt. Source: creditcardinsider