Paying Down Debt

There are several methods to paying down debt and there is one for every type of person. You’ll want to read up on the different methods and try what works for you. Don’t get discouraged if you are not seeing results with one method. You may need to try a few different methods until you find the one that is right for you. Remember that what works for one person, may not work for you.

'Snowball' Method

The snowball method was made famous by the author Dave Ramsey. This involves putting your debt in order from smallest to largest, regardless of interest rate. You then focus on paying off the smallest debt first. Once that debt it paid off, you take the money you were putting towards that one and put it towards paying off the next one. By paying off the smallest debt first you can get a feeling of progress and satisfaction and that motivates you to keep tackling the pile.

Debt Stacking

Interest rates can make all the difference and if you have poor credit, those interest rates can be sky high. This method focuses on paying off the debt with the highest interest rate first, regardless of the balance. This is especially important if your debt has used over 30% of the available credit limit. That threshold is important to maintain for good credit.

Balance Transfers

Often, you may receive offers for a credit card with 0% interest for a certain period of time. It can be worth looking into transferring your high interest card to a card with 0% interest. Make sure you read the fine print as there can be fees associated with balance transfers, as well as a time limit for the 0% interest. Some cards only offer it for 6 months. Divide your balance owed by the promotional period of 0% interest and see if you can afford to pay it off in that amount of time. This is a method you would only want to use once or twice and not get into a habit of continual use. Otherwise it can stall the ability to actually pay down debt because you’re simply transferring from one card to another.