How to get rid of debt on the loan
Get Rich / / December 20, 2019
There are several approaches to the repayment of debts and loans. To find the one that is right for you, you need to consider all the pros and cons.
Live under the burden of debt is not easy, but now few people can do without loans. However, there are several ways to break out of the early debt slavery. Perhaps some of these strategies and will approach you.
1. Snowball method
Imagine that you sculpt a snowman. For its foundation you will need a large snowball. To make it, you first sculpt a small snowball, and then his kata in the snow as long as it does not turn into a large bowl.
With debts can also be provided. Try first as soon as possible to pay off the smallest loan, regardless of their interest. Invest in it every free ruble. Once you close the loan, start adding the same amount you were paying on the loan has already been closed, the mandatory payment of the next smallest loan. As a result, you will have the biggest loan for which you will be making as much money as you have now spent on all your loans.
pros
Each discharged debt - it is a tangible victory. Closing one loan after another, you feel that you deal with the situation.
Minuses
This method is not the most profitable, as its goal - to reduce the amount of loans, rather than a rapid decline in the total debt. It may be that the last and the longest will be the loan with the highest interest rate. The longer you pay it, the more interest it will pay.
2. Method or stack avalanche
To start, you need to make a list of your loans in order of decreasing interest rates. First of all, try to close the loan with the highest interest rate. On other loans make minimum required payment and loan with the highest percentage - minimum payment and how much something from above. Once finished with the most expensive credit, go to the next in the list.
pros
This method allows you to save on interest.
Minuses
To repay large loans may take a long time. With this method, the result is not immediately noticeable, so many lose heart and a desire to abandon this method.
3. snowflake method
The previous two methods assume that each month you can allocate from the budget additional funds for the early repayment of loans. Unfortunately, this possibility is not all and not always.
However, one-off unscheduled revenues are almost at each: tax deduction, Proceeds from the sale of something unnecessary, casual part-time work or monetary gifts for the holidays. Method of snowflakes lies in the fact that all the money you send to pay off debt. Perhaps it will be very small incidental amount. However, huge snowdrifts grow out of tiny snowflakes.
pros
Small early payments - it's better than nothing. With them, the amount of debt will still be reduced faster than without them.
Minuses
This method does not predict when you will be able to fully pay off your debts.
4. Consolidation and Refinancing loans
The essence of this method lies in the fact that a few loans in different banks replaced one big loan. In some cases, you can reduce the amount of monthly payments on winning percentage when refinancing.
pros
New lending conditions may be more favorable to the old. Paying one debt instead of several convenient and easier psychologically.
Minuses
Not everyone banks provide the service of debt consolidation and refinancing their own loans. May require the costs of registration and collection of a large package of documents. Some banks will charge a penalty for early repayment, which will occur when refinancing loans from other banks, and in some places early repayment impossible.
It is not important how you pay on loans. Much more important is that you do it. So the best way for you one that you can stick to. Whichever strategy you choose, do not depart from it until then, until you pay all your debts.