Sunday, January 29, 2017

Out of the Red: 4 Keys to Paying off Your Debts the Most Efficiently

Accumulating debt has both positive and negative effects on your life. You must create some temporary debt in order to improve your credit score, but it can get out of hand very quickly. It's time to get out of the red and into the black by paying off your debts. Explore the smartest way to pay down these balances with efficiency in mind.

Focus on High Interest Rates

The first debt to pay off is the one with the highest interest rate. This debt is growing larger by the day with compounding interest. 

Try to work out a payback plan that reduces this debt first while keeping up with minimum payments on your other balances. By paying this debt off first, you'll save a lot of money on interest so that the funds can be allocated to the next debt.

Add Extra Money to the Principle

Some debts will take considerable time to pay off. As a solution, send extra funds each month to apply against the principal. Most bills have an area to write in this amount with a stipulation that it's for the original balance. 

With this strategy, there will be less interest on the principal because it's much smaller each month. The additional funds don't have to be too large either. Sending an extra $20 one month will still help your cause.

Consider a Payday Loan

A clever way to efficiently pay down your debts is through payday loans. Take a short-term loan on your upcoming check so that a bill can be paid on time. 

Some companies, like Payday Express, know how bad it can be to pay bills late. You'll avoid late fees, and some extra money might be placed toward the principle. Pay the loan back as soon as your employer deposits the money. 

You might try this strategy several times a year so that every bill is paid on time with extra funds added as well.

Try Balance Transfers

If your credit-card interest rate is getting out of hand, consider a balance transfer to another card or account. 

These transfers usually come with a fee, but you'll often benefit from a low or zero-percent interest rate for a short time period. Use this free time to pay off the balance.

Borrowing money from loved ones is a tempting offer, but this strategy can create problems. If payback is difficult, strife between parties can occur. 

Ideally, borrow from a reputable lender and pay it back as quickly as possible. You'll preserve your relationships when you keep financial matters dedicated to the professionals.

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