Have you finished the holidays with a lot more debt? Not all debt is money mess – a mortgage or rent, a car loan are often necessary debts.
The money mess is when you start adding up the debt you have on all of your store credit cards, and Visas, and MasterCards in your wallet. It’s not all credit cards – you might also have loans from financing companies for furniture or appliances that need be paid off too.
Pay down your debts
It is entirely possible for you to develop skills to shrink and pay off your debt. There are 2 widely used methods for paying down debt:
1) Debt Stacking Method
You pay off debt by making minimum payments on everything except the balance with the highest interest rate. You send as much as you can to chip away at the balance with the highest interest rate.
PRO: You save the most money in the long term.
CON: Sometimes it takes a long time to pay off a high-interest debt.
2) Snowball Method
You pay off the debt in order from the smallest balance to the highest balance.
PRO: You get one credit card or debt paid off more quickly and have those funds to begin paying the next smallest balance. As you pay off each debt, you gain momentum to pay off the next balance.
CON: You might be paying more in interest charges if you higher balances are on higher interest rates.
Another way to shrink your debt is with a debt consolidation loan. You could use the equity in your house to get a home equity loan or line of credit to pay off those credit cards and debts.
The other option is to get a personal loan, which might be more difficult depending on how much debt you actually do carry.
PRO: The advantage to either of these options is you would only have one payment to make each month.
CON: You don’t actually change the habits of excessive credit cards or excessive spending.
A third method to paying off your debt is to transfer the balances to one credit card with low interest rate. Pay attention to annual fees and balance transfer fees! First Castle has a low-interest credit card with no annual fee and no balance transfer fees.
PRO: Transferring balances to a low-interest card can be a smart move to have a single payment with lower overall interest charges.
CON: If you are interested in a balance transfer special, make sure you pay attention to what your interest rate will be after the promotional period ends. Promotional interest rates on many credit cards often jump to exorbitant amounts.
Help for your money mess
If you need help for your money mess, give First Castle a call. We can go over your options so you can make smart decisions on the path to money success!