Debt is a devilish word a plethora of people would surely like to stop thinking about.
In fact, it is so sickening that some people want to annihilate their debt as quickly as possible.
They take it more serious than their jobs. Now, that’s what we call, “Dedication”.
With all seriousness, it is not difficult to see why people would want to crush their debts, especially the ones with high interest rates.
Let’s unlock the secrets of how to demolish your debt like a pro.
Be “Debt” Serious
In order to treat anything like a pro, you have to be “Damn” serious about it.
The thing is that if you just want to get rid of your debt, then it’s not going to work. How?
With this train of thought, you’ll attract more damage than recovery, meaning you won’t be destroying your debt quickly rather you might actually end up drowning in more debt along the way.
So where to begin from after you decide that you’re nothing but serious about paying off your debt rapidly?
All Debt Paperwork Must Be Collected
The optimum way to get the work started is to understand your debt like the back of your hand.
First of all, gather all of the paperwork related to the debt which you wish to wipe out.
Whether your debt is a mortgage, a credit card, or a student loan, you may have received or signed the paperwork at some point in time for every debt that you owe.
Take your time and dig it out now.
There is also a chance that you don’t even know the creditors who you owe money to. A very scary thought. Isn’t it?
Here’s what you should do if this somehow describes you.
- Take a look at your every outstanding debt and find the paperwork or place a request for the paperwork from your lenders.
- After fetching all the paperwork, note down the terms of all the loans. Significant factors include interest rate, the loan duration, any fees or other monetary information.
- Once you get these details, you’re ready to start a grand battle of making your debt kneel down before you.
But Wait… We Forgot To Ask One Thing. Why Exterminate Debt In The First Place?
Before you start pounding down your debt, you need to understand why you got into the debt.
Why is it important to know this? Simply because if you don’t, you could easily slip further into debt. Before you decide which debt you should pay off first, you really should take the time to reach the bottom of why you got into debt.
For some people, figuring out why they ended up with a huge pile of debt may be an easy analysis. For instance, if your only debt is student loan debt from your college years, it is self-explanatory.
On the other hand, if you have maxed out five credit cards with almost casual purchases here and there, then you might need to dig a little deeper. Once you’ve got to know the real reason behind your debt, you can put your game face on and start tackling debt like it’s your job.
Two Key Methods of Bringing Your Debt To the Dirt
These are the two ways to tear apart your debt. The first one is the Debt Snowball and the second is known as the Debt Avalanche.
The Debt Snowball
The Debt Snowball is a popular way to pay off debt from an emotional point of view. So what is exactly the Snowball method?
For using the Debt Snowball method to tear down your debt you need to put together all your loans by the amount owed on them, arranging from the smallest balance to the largest one.
You’ll start by paying the least amount on all of your loans. The actual key is what you plan to do with all of the extra money which you’ll be pushing towards your debt to beat it.
The mission of this method is to collect all that extra money, referred to as a Snowball, and pay off the loan with the nominal balance.
This results in clearing your smallest debt piece as fast as possible, giving you a big win in your column.
After paying off your first piece of debt, you’ll keep this routine toward your next smallest loan balance along with the amount of minimum payment from the already paid off debt.
This will add to the size of your snowball and allow you to pay off your next loan sooner than you otherwise would.
The Debt Avalanche
As you already get to know by now that the Debt Snowball is not the most monetarily ideal mode to pay off debt. By focusing on the smallest balance first, you won’t be paying any attention to the interest rates which decide how fast the debts grow.
The Debt Avalanche counters this issue by using your extra payments to pay off the loan with the highest interest rate first.
This method may take longer to clear off your first loan, but you’ll be downsizing the interest payments on your debt as you keep paying it off, and you’ll be saving some money in the process.
This method is more popular among those people who like to follow a logical approach to pay off debt. The Debt Avalanche will get bigger and bigger as you pass through each loan. Simply add the minimum payments of the paid off loans to your next highest interest rate debt payment, just like the Debt Snowball.
The Answer To The Debt Destruction
The actual answer to debt demolition is paying off your debt.
Whether you go for the Debt Avalanche or the Debt Snowball, the answer will remain the same. Choose whichever makes more sense to you.
If neither of these methods makes your debt less burdening, then create your own. The key agenda should be to just get that debt paid off.