If you have debt to pay you may be wondering what is the best way to pay it off. There are a number of competing debt repayment methods or schemes that will tell you that there’s is by far the best way. I fact there is no one perfect way to repay debt, the ideal way for you will depend on your own situation an personality. Consider the following 3 approaches:
Debt to Pay – Pay off the Most Expensive First
This method makes logical sense. You sort your debts into order of the interest rate that they charge and use any additional income that you have to pay off the most expensive debt first. In this way the money that you pay off your debt saves you the most interest.
Debt to Pay – Pay off the Smallest First
One criticism of the above method is that you might spend a long time paying off an expensive debt and not see very much progress. This alternative method sorts your debts into order of their size. You then use as much income as you can to pay off the smallest first. In this way you will reduce the number of outstanding credit balances that you have at the fastest rate.
Debt to Pay – Calculate it Once and Forget it!
The problem with both of the above methods is that they require a level of self discipline and organization that most people that get into debt just don’t have (I know I didn’t). My alternative suggestion is to try and work out why you have got into debt and address that issue. Once you have done that, then as long as your debt repayments are reducing your debt and you can afford them – just forget about them and concentrate on enjoying your life and not taking on any more debt! Your credit balances will be cleared eventually as long as you keep up the payments and don’t take on anything new.
Tags: Debt Advice, Debt Solutions, debt to pay
Credit companies will often try and sell you debt insurance to cover your payments if you become ill or are made redundant. Unfortunately these policies are often used as a way for the credit company to make a lot of money and are very bad value.
Debt Insurance – What is it?
The debt insurance (or repayment cover) that is sold to you when you take out a loan will pay your repayments for a specific period of time (often only 12 months) if you are ill or (for some policies) if you are made redundant.
Debt Insurance – Should You Use It?
Credit companies should not make taking on the debt insurance a condition of offering you credit. You will frequently find that it is a better idea to buy insurance against sickness (permanent health insurance) separately. Prices are far more competitive and you will also be able to insure yourself for an amount that will help you to live – not just to pay your credit bills! The other advantage with permanent health insurance is that it normally insures you for as long as you are unable to work, whereas debt insurance will often only pay you for a set period – typically 12 months.
Be aware that you may be subjected to high-pressure sales tactics on these sorts of insurance policies as staff at loan companies may be targeted to sell a certain number of policies.
The other problem with debt insurance premiums is that they are frequently added as a one-off charge at the start of the loan that you then pay interest on for the duration of the loan.
Tags: Debt Advice, debt insurance
Are you having trouble imagining a “debt free me”? Do your debt problems just seem to big to ever escape from? Well the good news is that however large your debt problems are there is always a way to get out of them. I’m not going to say that the things you have to do are always easy or without pain, but if you’re determined to escape your debt problem then you WILL be able to.
Debt Free Me – Through Declaring Bankruptcy
The easiest way to prove that you can escape from your debt problem is to give the example of bankruptcy. In the UK you will be able to declare bankruptcy if you have a significant level of debt and all of your personal debt (excluding secured lending like mortgages and car loans) will be gone. It’s not a decision to be taken lightly, but it does get rid of all of your debt immediately.
Debt Free Me – Through Hard Work and Budgeting
If you are in work and have income that you can use to pay off your debts then it’s surprising how quickly you can start to make a difference. Do a full budget and try and cut down on your spending wherever you can – use the extra money to pay off your debt more quickly. Always pay off your debt in order starting with the debts with the highest rate of interest.
Tags: Debt Advice, debt free me
