The COVID-19 pandemic has left households the world over deeper in debt. According to recent research, during the first six months of 2021, global household debt rose by $1.5 trillion.
No matter where you live, some simple strategies can help you pay off debt faster and regain control of your finances. If you’re wondering how to pay off debt most efficiently, take a look at these three debt repayment strategies. Then, select the one that best suits your debt situation and budget.
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Pay Off Debt Faster Your Own Way
Before choosing a debt repayment strategy, know that not all strategies are suitable for everyone. It depends on your budget and how much debt you owe. However, everyone should be able to use at least one of these strategies.
Debt consolidation is one of the best strategies for paying off debt. It involves rolling all of your debts into one loan so that you only have one payment to deal with each month. Because your one monthly payment is typically lower than the total of multiple minimum payments, consolidation can loosen the budget a bit or give you more cash to put toward your debt.
Depending on how much debt you have and whether you own a home, you may be able to consolidate debt with a debt consolidation loan, personal loan, cash-out mortgage refinance, or home equity line of credit.
If you have several different debts you’re attempting to pay down, prioritizing one debt over the others can help. Debt prioritization can be quite beneficial when paying off credit card debt.
The idea is to pay minimums on all debts and then pick the one you aggressively pay down. When that one debt is paid off, you then select another on which to work. Continue this process until you’re out of debt.
When choosing which debt to pay off first, pick your highest-interest debt or your smallest debt. By starting with the highest-interest debt, you’ll save the most money. By choosing the smallest debt, you’ll feel like you’re making more progress and be more encouraged to continue.
While the previous two strategies can help pay down debt quicker, you may have more debt than you can manage. In that case, you might benefit most from working with a debt counselor.
A debt counselor will work with your creditors to see about lowering your payments and then put together a repayment plan based on your budget. You can get more info here about debt counseling.
Select Your Debt Pay Off Strategy
It probably took you a while to get into debt, and it will take time to get back out. But by picking the right debt strategy and forming a workable debt payment plan, you should be able to pay off debt quickly as long as you stick with it. The sooner you get started, the sooner you’ll be out of debt.
For more tips on debt repayment, explore the money section of our site.