{"id":9031,"date":"2023-01-05T16:39:38","date_gmt":"2023-01-05T14:39:38","guid":{"rendered":"https:\/\/learn.thndr.app\/?p=9031"},"modified":"2024-07-31T13:03:09","modified_gmt":"2024-07-31T11:03:09","slug":"3-ways-to-get-out-of-debt","status":"publish","type":"post","link":"https:\/\/thndr.horizondm.com\/learn\/3-ways-to-get-out-of-debt\/","title":{"rendered":"3 ways to get out of debt"},"content":{"rendered":"\t\t
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Are you ready to take off on a journey to become debt-free? It\u2019s about time to take control of your finances. Here are some strategies\/ tips to help you pay off your debts as efficiently as possible. Buckle up.\u00a0<\/span><\/p>

The Snowball method: bottom-to-top\u00a0<\/span><\/h3>

In general, the snowball concept means that you start with small things and work your way up. As you gain momentum and speed, your snowball will gradually grow.\u00a0<\/span><\/p>

When it comes to debt, the snowball method involves paying off your debts starting with the smallest balance first, while continuing to make minimum payments on your other debts. As each small debt is paid off, you can then apply the amount you were paying on that debt to the next smallest debt, creating a “snowball” effect. This method can be motivating because you can see progress quickly. Yet, it may not be the most cost-effective way to pay off your debts since your highest interest-rate debts (aka large debts) keep accumulating more interest over time.\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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\n\t\t\t\tLet\u2019s imagine that you saved up $300 this month to pay off your debts (after paying your living expenses). You currently have 3 debts: \n\nA student loan with an interest of 20%, a credit card debt with 7% interest, and a house installment with 15% interest \n\nThe minimum monthly payment required for the 3 debts is $30. If you\u2019ll use the snowball method then you\u2019ll pay the minimum required for the 3 debts ($30 x 3), which costs $90. Then, you\u2019ll pay the remaining money ($300-$90= $210) on the debt with the lowest interest rate (aka the credit card debt).\t\t\t<\/p>\n\t\t\t\t\t<\/blockquote>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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The Avalanche method: top-to-bottom<\/span><\/h3>

In contrast, the avalanche method focuses on paying off the debts starting from the highest interest rate first. <\/span>This method can save you money on interest charges, but it may not be as motivating because it may take longer to see progress.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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\n\t\t\t\tWhat if you decided to use the Avalanche method instead? Then, you\u2019ll pay the minimum required for the 3 debts, which costs $90. Then, you\u2019ll pay the remaining $210 on the debt with the highest rate, which in this case is the student loan with the 20% interest)\t\t\t<\/p>\n\t\t\t\t\t<\/blockquote>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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The Consolidation method: the merge <\/span><\/h3>\n

The name of this method explains it all. It is about merging\/ consolidating all your debts into one big debt. Huh? Do you mean that I should acquire a <\/span>new<\/span><\/i> debt to pay off my <\/span>other<\/span><\/i> debts? Exactly. <\/span><\/p>\n

There are two ways to consolidate your debts. The first method is to get a low-interest credit card where you can transfer your debt from the old credit cards to the new one. This is an effective way since you\u2019ll have all your debt in one place. And, the cool thing is that you\u2019ll pay interest for only ONE card. <\/span><\/p>\n

The second method is to get a fixed-rate debt consolidation loan. This is a loan you take from the bank and it is calculated based on the amount of debt you owe on all your cards. In other words, <\/span>you\u2019ll combine multiple debts into a larger one. It\u2019s a win-win situation since you\u2019ll only have one debt with more favorable terms- a lower interest rate and a new repayment deadline. <\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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\n\t\t\t\tThis time you decided to use the consolidation method by taking out a consolidation debt from the bank. So, now instead of having three repayment deadlines in 3 months, you have one deadline in a year. Great news, one debt and a new repayment deadline!\t\t\t<\/p>\n\t\t\t\t\t<\/blockquote>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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\n\t\t\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t<\/i>\t\t\t<\/span>\n\t\t\t\t\t\t\t\t\tNext Post<\/span>\n\t\t\t\t\t<\/span>\n\t\t\t\t\t<\/a>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

Are you ready to take off on a journey to become debt-free? It\u2019s about time to take control of your finances. Here are some strategies\/ tips to help you pay off your debts as efficiently as possible. Buckle up.\u00a0 The Snowball method: bottom-to-top\u00a0 In general, the snowball concept means that you start with small things […]<\/p>\n","protected":false},"author":9,"featured_media":9149,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[447],"tags":[89,80,96],"class_list":["post-9031","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-everything-else-investing-en","tag-finance","tag-investment","tag-personal-finance"],"_links":{"self":[{"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/posts\/9031","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/comments?post=9031"}],"version-history":[{"count":7,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/posts\/9031\/revisions"}],"predecessor-version":[{"id":18640,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/posts\/9031\/revisions\/18640"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/media\/9149"}],"wp:attachment":[{"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/media?parent=9031"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/categories?post=9031"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/tags?post=9031"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}