Living with debt is miserable. The deadlines, aggressive debt collections, and the interest fee, all these things only add to your debt stress. Not to mention, such things can affect your physical and emotional health; therefore, it’s mandatory to fix the situation right away.
Now the question is, how to fix such a situation? How to get rid of debt? Do you have a debt plan in place? If not, you need to get one right now. Paying off your debt without having a debt plan is like moving on a road with no directions or being map-less.
A debt plan can map out the way for you, making the endpoint easily accessible. Mentioned below are two effective debt plans along with their pros and cons. I’m sure they will help you along the way.
The Debt Snowball
The debt snowball is an exceptionally effective method for those who have multiple debts hanging on their heads. Not to forget, it works well for people who have no motivation to take this road. With the instant gratification it brings to the table, it keeps you satisfied and motivated along the way.
In the debt snowball method, you start by targeting the smallest debt first. Once you’re done with the smallest debt, you then move on to the next smallest in terms of the outstanding amount. The only downside is that in this process, you ignore the interest fee.
Plus, in order to make the debt snowball method work, you need to have a significant amount of money in your account so that you can make monthly debt payments. Without having the required money, the debt snowball method is going to miserably fail.
Debt Consolidation
For those who cannot afford to make monthly debt payments or those who have debts with higher interest rates and closed deadlines, debt consolidation is the best option. It refers to refinancing your debt with the help of a consolidation loan.
While it may seem silly to take another loan to pay off the existing one, it’s actually beneficial for people with a good credit score. Yes, if you have a great credit score, you’ll get the consolidation loan with a low-interest rate and an extended deadline.
In this way, you can pay off your existing debt all at once and later return the consolidation loan gradually every month. The downside of debt consolidation is that it doesn’t make you entirely debt-free as you keep dwelling over the debt hanging on your head. Although it brings relief for some time, it isn’t a permanent solution.
The Final Word…
Both the debt plans mentioned above bring along their own pros and cons. You need to choose one according to your situation. It would be great if you consult a credit counselor and get some expert opinion on the matter. Plus, you must look into both debt management plans thoroughly before you opt for one. I wish you all the best, my friends.