Debt is a major problem for a lot of people. According to Experian, the average debt per person was approximately $96,000 as of 2021. That number includes credit card balances, mortgages, student loans, and car loans.
If you have a substantial amount of debt, paying it off can feel impossible. If you don’t know where to start, here are nine tips to pay off debt faster and get control of your finances.
1. Calculate how much debt you have
If you’re overwhelmed by your debt, you may not have looked at your accounts in a while. While it may be scary, the first step to getting out of debt is understanding exactly how much money you owe.
Review all of your bank, loan and credit card statements to see what you owe and what the interest rates are for each account. If you aren’t sure what debt you have, you can find out what you owe by reviewing your free credit report at AnnualCreditReport.com.
2. Pick a debt payoff strategy
Once you know what types of debt you have and their interest rates, you can choose a debt repayment strategy. There are two main approaches:
Debt snowball: With the debt snowball method, you make a list of all your debts and order them from the account with the smallest balance to the one with the largest. You keep making the minimum payments toward all of the accounts, but any extra money goes toward the debt with the smallest balance first. After you pay off the first debt, you move on to the next one, and so on.
Debt avalanche: If you follow the debt avalanche method, you focus on paying the debt with the highest interest rate first, rather than the accounts with the smallest balance.
Which approach is best is dependent on your own habits and mindset. Some people prefer the debt snowball because they’re motivated by paying off individual accounts. By contrast, others prefer the debt avalanche method because it’s more cost-effective over the long run. Whichever strategy you choose, you can make progress against your debt and regain control…
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