If you’re struggling to make ends meet due to the amount of debt you currently have, it might feel like an impossible situation to overcome.
Mounting bills, growing interest rates, and the number of payments you need to make every month for your rent, your mortgage, your car loan, your utilities, your credit cards, student loans, medical bills…it’s no wonder it can feel overwhelming.
The good news is that there are ways you can take back control of your finances and do so on your own. Taking a page from our playbook, here are three ways for you to tackle your debt.
The Debt Snowball Method
We’ve written previously about the debt snowball method on our blog and for good reason — it remains a popular and successful way for people to tackle their debt. The debt snowball approach is touted by personal finance authors and bloggers as an easy way to get started on the road to becoming debt-free. The process is fairly simple.
- First, you make a list of your debts and arrange them in order from the smallest amount to the largest.
- Then you determine what the minimum payments are on all debts that you owe.
- Next, organize your payments so that you pay the minimum due on all of your bills and pay extra toward the smallest balance.
- Once you have the smallest debt paid off, move on to the next in your list, applying whatever extra money you can to the payment.
The idea behind the snowball method is that you gain momentum, or at least feel like you are, by eliminating the smaller debts quickly (which is why it’s referred to as the debt snowball). As you begin to pay off your balances and see immediate results, you’ll feel encouraged to continue and to direct all money that you can toward your bills until you are completely out from under your debt burden.
The Debt Avalanche Method
The debt avalanche method is similar to the debt snowball method in that it requires you to review your current balances and to prioritize them, but it’s handled much differently.
- As with the debt snowball method, you make a list of all of your debts.
- The next step is to arrange your debts in order by interest rate.
- Then, same as the previous snowball approach, determine what your minimum payments on all of your debts are.
- Pay down your debts, applying more or extra money toward the bill with the highest interest rate.
The aim of the debt avalanche method is to try to be the cheapest way for you to get out of debt. By focusing on the highest interest rate first, you’re limiting the long-term damage that might occur to your credit, as well as saving yourself money in the long run.
The Debt Consolidation Loan Method
When it comes to eliminating multiple debts, the fastest, and in some ways the most difficult option is to get a debt consolidation loan. This method is quick as you’re combining most, if not all, of your existing debts into one. The difficulty comes in knowing which lenders are loaning money in your market area, as well as successfully applying for a loan.
With a debt consolidation loan, you’re making a trade off, but in the process putting yourself into a better financial position by lowering your debt-to-income (DTI) ratio, specifically what’s known as the back-end ratio. Taking out a loan to pay off multiple debts leaves you with fewer, or perhaps even one, loan payment to make. People who are having a hard time managing multiple credit card bills can sometimes find relief taking out a debt consolidation loan.
Depending on your credit score and your current financial situation, you may be able to apply for either a secured debt consolidation loan (using collateral to obtain a lower interest rate) or an unsecured debt consolidation loan (needing no collateral but having a higher interest rate). How do you know which loan option might be best for you? Or which lender out of the thousands available online are not only willing to lend to you, but are reliable and experienced?
This is where AmOne can help. Over the last fourteen years we’ve helped people just like you learn how to become debt-free and get trusted, expert debt help when needed. We can help answer your questions about your debt and work with you to find out what debt solution is the right one for your unique situation. Our free service has helped over three million people obtain 1.4 billion dollars in loan approvals. Let our financial search specialists go to work for you. You can learn more by either filling out our simple to use online debt solutions form or by calling us toll-free at 1-800-781-5187.