In regards to owing money, high-interest debt remains the most cumbersome. It seems to grow, even after paying the monthly due amount for what feels like an eternity. Stopping the vicious cycle takes strategy, and we’re here to show you how. Continue reading for the full details.
Should I pay off the highest balance or highest interest first?
If saving money is the goal, you’ll typically want to pay off high-interest debt first. The reason is with the way interest accrues. For instance, for an original balance of $1000, at a 9.9% APR, the total interest on consistent $50 payments would be $97.37. However, if you paid $200 per month, you’d only pay $25.50 in interest charges.
By removing your high-interest liabilities first, you’ll free up more money along the way. Whenever you solve a debt, it’s good to use the newly available income to pay off the rest of your obligations. You’ll create a snowball effect and gain momentum with your finances.
How do you know if you have high-interest debt?
Only 39% of Americans with credit card balances know their APR. Furthermore, the lack of understanding is costly. Determining your interest value will help you prioritize your accounts. Generally, credit cards and other unsecured loans tend to have higher interest rates. If the APR is greater than 20%, they qualify as “bad” or “expensive.”
Any debt that drags down your financial well-being is what you should work to resolve. Moreover, it’s best not to take on unaffordable debts in the first place.
Choosing a payoff strategy
While there are multiple payoff strategies to choose from, try focusing on the plan that works best for you. Generally, debt elimination works when you do the following:
1. Stop incurring new debts.
2. Review your budget.
3. Place available income towards paying off your balances.
4. Find ways to increase your income, thus increasing your monthly payments.
Take advantage of balance transfers
By moving existing debt, you’ll speed up the payback process. You should consider a balance transfer only if it gives you a lower rate. Additionally, with balance transfers, you can consolidate multiple loans. Since having only one revolving credit balance is more manageable, a balance transfer is a great way to go.
The Achieva Cash Rewards Mastercard makes to entire process easy. Enjoy a GOOD rate; plus, you’ll receive other perks such as theft protection and chip card security. Experience the convenience and reliability of the Achieva Cash Rewards Mastercard. Take advantage of a balance transfer today.
High-Interest debt should not stop you
Don’t let high-interest debt discourage you from achieving your goals. With a set plan, you can pay off your loans responsibly. Stay tuned to the AchievaLife Blog for additional money strategies, media, and resources. Banking for GOOD is only the beginning of your long-term financial success.
