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How to pay off your debt

by | Jan 12, 2021 | Personal Finance

Everyone keeps preaching that you should pay your debts – but no one ever explains how to do it. Well, here are the most common debt payment methods – if your debt is affordable, you are not skipping payments and you are not taking from Peter to pay Paul.

Snowball method:

Here, you pay your smaller debts first. Psychologically, this method works well – because there is a real sense of achievement when you can square up an account, close it and move onto the next one.

Avalanche method:

With this method, you pay down debt with the highest interest rate first. You’ll save money in the long run by keeping interest charges under control.

  • First pay the minimum payment on all of your debts.
  • Secondly, put any additional money toward the account with the highest interest rate. Then continue to do this until the high-interest account is paid off.
  • Thereafter, take the minimum payment you were paying on the first debt, as well as any additional cash, and put that toward the account with the next-highest interest.

 

If you are skipping payments and feeling overwhelmed by your debt, then the best thing to do, would be to contact a registered debt counsellor who can:

  • Lower the interest rates on your outstanding debt.
  • Lengthen your repayment term.
  • Consolidate your debt repayments to one lowered monthly payment.
  • Free up money in your budget so that you have more money left for necessities.
  • Protect you from harassment by debt collectors.
  • Secure your assets against repossession.
  • Give you peace of mind.

 

Everyone is struggling. No household has been immune to the effects of Covid and lockdown.

If you are feeling uneasy about your financial situation – then please contact us for a free debt assessment to determine if you are over-indebted.

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