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How To Manage The Debts Effectively

We have got accustomed to live like a helpless bird, so we think that there is no solution for debt trap. If ever, you are saddled in a debt trap, you should not brawl, lest you should find ways to get out of it.

Here are few pointers that can make you get rid of debt.

Method 1-Debt Avalanche

· A good debt management plan conveys that you should prioritize your debts.

· Make extra payments to your account until it is full.

· Now, add minimum payment and extra amount to second debt in your list.

· It is an ongoing process, keep on repeating the same until your debts have been repaid

Pros

The greatest perk of this debt management plan is

· It is easy to calculate

· It is easy to follow

· Debt management plan can include or exclude the first mortgage

· It minimizes amount paid as an interest.

Cons

· If you adopt this debt management plan, you will be able to focus only one debt at one time

· This plan doesn't distinguish between secured and unsecured debt.

· Lastly, having a high balance on top of the list can be discouraging.

2. Method 2-Debt Snowball

It is another method to eliminate the debt from your list. In this debt management program, you need to list your debts in descending order i.e. from the smallest to largest-and make minimum payments to each debt.

The main features of this method are given below

· You can make excessive payments, to save yourself on interest front.

· Now, add minimum payment and extra amount to second debt in your list.

· It is an ongoing process, keep on repeating the same until your debts have been repaid

Pros

· Among all debt management programs, it is more suitable because it focuses on paying the entire amounts.

· The method is easy to follow.

· It quickly eliminates small debts from your list.

Cons

This method is not a mathematically sound method.

Method 3-Focus on Minimum Debt- It is another method that focuses on minimum debt to be repaid every month.

Features

· Unlike other debt management method, in this method you need to maintain a budget

· Divide extra payments into no of accounts

· Provide that amount to each account available on the list

· You can continue the process until the debt is paid in full.

Pros

· This method allows you to pay multiple debts at one time.

· The extra payment can be included in your monthly budget

· This plan can include or exclude mortgage payments.

Cons

· It is not a mathematically sound method.

· Lack of focus on one particular is the most discouraging aspect of this method.

· This method does not differentiate between secured and unsecured debt.

· Disproportionate payments are the major drawback that anyone faces.

Apart from these methods there are other ways to kick off your debt.

Debt management companies can be the solution provider, these companies can provide you tips and tools to manage your debt effectively. Nonetheless, these debt management companies can serve you better if you follow the budget and keep a tab on your credit card expenses. Also, the best way to deluge from debts is by changing your spending habits. It can do wonders for you!