There’s nothing worse than feeling weighed down by debt. With too much debt, you’re strapped with a lot of stress, anxiety, and limitations in your lifestyle choices. But with a debt repayment strategy, you can pay down debt efficiently and finally get back to living life to the fullest. And we’ve got three suggestions to help you demolish debt: the snowball strategy, the avalanche strategy, or refinancing.
Three Debt Repayment Strategies You Can Start TodayÂ
Deciding to tackle debt can feel overwhelming. It’s discouraging to log into your accounts and see the large sums and high-interest rates staring back at you.Â
Luckily, economists and personal finance experts have developed effective strategies to help you target, consolidate, and eliminate debt. While each is different in their thinking, they are all effective options that many have used to pay off what they owe successfully.Â
The Debt Avalanche Method
This method aims to help you pay down your debts by targeting loans with high-interest rates. When using the debt avalanche method, you make the minimum payments on all your loans and then utilize the extra money in your budget to target high-interest loans.
The idea is that if you target high-interest loans, you won’t waste as much money in the long term paying the interest earned on those loans. That means you pay less interest over time.Â
Overall, the debt avalanche is an excellent method to help you save hundreds of dollars in interest over the long term. However, this method requires extra income to put towards those loans, and it also takes more active management of your debt repayments.Â
The following method takes the avalanche and turns it on its head.
The Debt Snowball Method
The debt snowball method aims to help you pay down debts by targeting the smaller, more manageable amounts of debt first. Much like the debt avalanche method, you start by making all of your minimum payments. Then, instead of paying down high-interest loans with your extra funds, you target the smallest loans first.Â
The thought is that by paying off your smaller debt amounts, you’ll get a much-needed boost of confidence and celebration. This confidence then empowers you to continue paying down the more significant amounts.Â
This method focuses less on saving you money over time and more on overcoming the mental blocks from debt. So if you find yourself feeling overwhelmed or discouraged when it comes to repaying debt, this option might give you the boost needed to keep at it.
Refinancing
Job losses or emergencies can make it difficult or impossible for some debt holders to pay even the minimum payments on their current loans. In this case, the debt avalanche and the debt snowball aren’t feasible options. If this is where you’re at, refinancing might be your best option.
Refinancing debt typically involves consolidating any debt you have, and negotiating for a better, more achievable repayment plan. For some, that means lower monthly payments. For others, it can mean better interest rates or a longer repayment term.Â
Even though this strategy doesn’t decrease the total amount you owe, it is often the smartest option, even if you are already able to make your current payments. That’s because refinancing helps make the repayment process a lot more manageable and can lower your interest rate, saving you money in the long run.Â
Defeat Your Debt this Year with the Help of DEXSTA Federal Credit UnionÂ
You don’t have to fight off your debt all on your own. At DEXSTA, we’re here every step of the way to offer the tools and resources needed to achieve financial freedom. With debt consolidation, you can defeat your debt and get back in control of your finances.Â
Give us a call at 302-571-0522 or connect online to learn about the different debt repayment options available.Â