Eliminating High Interest Bills A Proven Debt Reduction Strategy in 2014
Paying Off High Interest Bills…A First Priority for Consumers in Debts
Consumer debt whether personal loans, credit card debt, mortgage, or student loan is one thing that creates daunting moments to consumers. With the earnings from work, people try to pay their bills and keep their heads above water because debts have disoriented their finances. However, there is still hope that you can come out of financial debts if you plan carefully and adhere to certain rules.
A stack method can help you pay your debts is a much easier and comfortable way than you may think. Paying off high interest rates first should be a priority when planning for which debts to settle down. You need to make a list of all the debts you have and their interest rates. The highest interest rates should be accorded top priority, as this is a debt that can quickly mount up and continue destabilizing your financial goals.
Interest rates are a big weapon if you want to manage your debts and reduce them. Since banks and other financial institutions are using this weapon, you can also apply it and see how it works. Interest rates increase the amount you have to pay back significantly. The best way you can get rid of debts, as experts recommend, is to start attacking those balances, which are carrying the highest interest rates first.
When one is cleared, you move onto the debt with the next highest rate. While tackling the debt is this manner, you also need to ensure that you make the minimum pay off for all other outstanding debts. With the highest interest rate debt, what you should be aiming at is doubling, tripling, or even quadrupling the minimum payments so that you clear it within the shortest period possible.
At times, people feel more satisfied when they clear a small debt first because it is easier but this is just a consolation since the high interest rate loan is growing hugely. And, as Linda Sherry, an editorial director with a San Francisco consumer advocacy group, the Consumer Action says, you need to size up bills by their interest rates than using the amount of the balance.
The amount of money you owe does not matter a lot especially when you are paying off a big interest rate, Sherry further notes. However, since paying off those high interest rate debts is sometimes discouraging, you may need to consider knocking off those little debts first. It makes sense to pay the highest interest rates debt first, but people often get discouraged, something that affects their gratifications.
It appears that it more gratifying when people pay off the little balances because they clear them fast. This makes them feel that they are making some progress. While by clearing the little debts first reduces the bills pile, this is only good if it will give you the morale and boost you need to stick to the pay down you have planned.
Once, you have cleared the smaller debt balances, you need to go back to the initial plan of clearing the highest interest rates first. This way, you can take the money, which you used to pay for the small bills you have just knocked out, and supplement it with the amount you have set for the high interest rate balance.
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