by Heather, April 09, 2012
As we discussed in our post about paying off your debt using the Debt Snowball method, there are other methods in which to tackle your debt. We are going to look at a different point of view today; the method that takes into account what interest rate is the highest.
As with any method you use for debt reduction and just in general, you need to have your emergency fund in place. Most people will tell you that once you have an emergency fund, the less you will need your emergency fund. It is kind of like a Newton’s Law thing.
With your minimum $1000 in place, you want to set about compiling all of you debt in front of you and the interest rates along with the amounts you are paying each month. Now there are a couple of different ways to tackle this debt.
One way is to look for a no fee zero interest card. Many card holders will run promotions for a year or more so if you can get a card like this, you can transfer your balances over. Some companies will charge a 2 or 3% transfer rate or a flat fee to move the balance; many cards charge nothing. It should still be a bit cheaper than paying the full interest you have now.
Just get the best deal you can and consolidate all of your balances onto this card and start paying it off as fast as possible using the original amount of money you were paying on your spread out card balances, plus any more you can afford. If you run out of promotional period, look for another low interest card and transfer again.
Another option is to just start paying the debt off using the Snowball Method but instead of starting with the lowest balance, you focus on the highest rate interest card or debt and snowball your payments.
The best way to tackle your debt is to figure out what works best for you and get to it. Track your progress and focus on how great it is going to be once it is done! Good luck!