When you are overburdened by debt, then you are desperate for a solution, especially if you’re running a business at the same time. This is why you have to make sure that you dig out an effective strategy for debt relief. We will look at some of the most efficient strategies available that can help you get rid of your debt.
Different strategies for debt relief
Lowest Balance first
The lowest balance first is also called the Snowball strategy. This means that you first clear the accounts that have the lowest balance. This has a psychological effect on you that you are in process of getting over with your financial issues.
The snowball method is often used when you have to clear the revolving credit cards. When you have to make use of the Snowball method, then you first list your debt from smallest to the largest.
For example, you have to deal with four different debts. $500 is the medical loan, $2500 is the credit card debt, car loan is about $7000 and student loan is $10,000.
Now, let us look at the payments you have to make. For the medical bill you have to pay about $50. For the credit debt you have to pay about $63. For the car loan a payment of about $135 is due. The student requires you to make a payment of about $96.
The way you will follow this strategy is that you will pay the minimum amount on all the debt except the medical bill. Let us assume that you earn about $500 extra because you have a side job.
What you will do is that you will pay $550 on the medical bill so this debt will be cleared in one month. Next, your focus will be on the credit card debt. You have $50 extra that you used to spend on the medical bill and $500 is your side job earning. This collectively makes $550. You will add up $63 to $550 and that totals $613. If you follow this strategy you will clear your credit card debt in about 4 months.
Highest interest first
The Highest interest first is also called the Avalanche strategy. This strategy is commonly used and works well when you are desperate to get rid of your debt issues. This means that you will clear the high interest debt first.
For example, if you have two cards. On one card you have to pay an interest of 10% and on the other card you have to pay an interest of 20%, then you will clear the card that has the interest of 20% first.
If you still have issues paying your debt, then you should consult an accredited debt relief service. The service will give you all the insight and assistance. This way you can even come up with a customized strategy for debt relief. It is also important that you should evaluate the pros and cons of a strategy before deciding to opt for it in the first place so use your discretion.