Tag Archive | "Debt repayment"

The Top Four Debt Repayment Strategies


Debt Snowball

The beginning of a debt repayment plan is hailed as the most difficult. It is at this point that credit seems at its most overwhelming. Denial is a feature that leaves debtors with an underlying sense of dread that hasn’t been acknowledged on a conscious level. This leaves you unable to create a solid plan to resolve the problem, which creates the false impression that the issue is unsolvable. For this reason, all debt repayment plans should begin with a conscious weighing up of the principle amount. Facing up to the entire figure, whether through comprehensive digital tools or simply by pen and paper is the only way to eradicate denial and create a solid idea of how to approach repayment best. Creating a savings pocket that consists of at least 10% of your income is another initial step that is advised by most financial advisors because it prevents you from burying yourself in additional debt the moment emergency strikes. Once those two steps have been taken, there are a number of repayment strategies to choose from.

-1) The Snowball Strate

This is among the most advised tactics because it works on an emotional level to motivate debtors to continue working on their debt long term. It involves paying off the smallest debts first so that a higher number of debts can be eradicated as quickly as possible. This technique doesn’t necessarily offer the lowest total amount of interest, but for those who feel overwhelmed and helpless about their financial situation, it can lead to the best outcome.

-2) The Snowflake Tactic

Similar to the snowball approach, this method uses a priority list based on the smallest debts, as described by Time. However, instead of paying off debt once a month, several monthly payments are encouraged. Money saved or found during the month is automatically and immediately assigned to debt repayment. By paying off small amounts between salaries, you are continuously rewarded with results and better able to control your budget. This tactic also gives creditors an indication that you are working in a goal oriented way to eliminate your debt.

-3) The High Interest Approach

This approach is among the most financially sound of all strategies. Debts with high interest rates are paid off first so that the ultimate principle repayment is minimized. Debts will be paid off faster as long as motivation is not reliant on frequent successes. The process is made easier by consolidating debt and placing only minimum payments on low interest accounts. Instead, the latter amount can be placed in a high interest savings account to increase repayments on high interest debts. Debt counseling services can be used to strategize improved terms and fees.

-4) The Pragmatic Approach

The simplest and most practical way to eliminate debt is by minimizing expenses and maximizing income so that larger repayments can be made on a monthly basis. This becomes easier to achieve when every facet of your income is directly assigned to a particular payment. This is the harshest tactic, since it entails a new standard of living that may include taking on a part time job. For those who already have challenging work schedules and rudimentary budgets, a more comprehensive strategy is needed.

Image credits: http://www.flickr.com/photos/lendingmemo/11702964564/

Source: http://business.time.com/2011/09/22/debt-tsunamis-debt-snowballs-and-why-the-conventional-wisdom-about-defeating-debt-is-wrong/

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Situations that may lead you to needing a loan


Situations that may lead you to needing a loan

Situations that may lead you to needing a loan

You must not be the one want yourself to grab a debt. No one wants a debt on the shoulder. Experts also suggest people to avoid debt, to reduce debts as well as to repay debts as soon as possible. But, situations may come which shall lead people to get a loan. In that case, that particular person is obliged to take debts in shoulder. These situations are always avoidable. But, sometimes, in such situations, loan can become a great help to the people. And also, to recover situations like that, money is needed badly. In that case, loans can be the ultimate source of financial solution. Here you get to know the situations in details which may lead you to get a loan:

In times of financial hardship

People of little income and moderate income have to go through financial hardship. Situations may come when they have to consume something that is out of budget or there may occur need of more money. In that case, the income is not enough to meet that thing. People face the need of a short term loan that time and that is why they apply for payday loans or alternative to that financial aid.

Paying bills:

Paying bills is a very necessary task for people. Especially, it has a huge impact on the credit of the borrowers. Also, a good citizen must pay the bills properly. Missing the payments of the bills has dangerous impacts as well. So, when situations come to people that they do not have sufficient money to pay the bills, they need a loan to do pay that. In that particular condition, the short term or short amount of financial aids become very helpful.

Debt repayment:

Debts are not good for personal finance. Often people get drowned in severe debt and that debt derives from more than one loan. That’s a true troubling situation indeed! So, in that case, people need a loan to repay the existing debt. These unsecured loans are named with a particular term named debt consolidation. Consolidation is a loan to repay the existing debts and throw a favorable and affordable interest rate to the borrowers. That repayment structure is long term so that the borrower can manage to repay the debts accordingly. So, people need loan when they are in huge debt.

Education expense:

The education expense is not a less expensive thing. People need a lot of money for bearing the costs of education. For that reason, the borrowings of student loan have emerged to a larger extent in USA. The student loans are federal as thus the interest and repayment is quite easy for the borrowers. The loans can be both subsidized and unsubsidized. Even the forgiveness programs are also available for the borrowers. For that reason, to bear the education expense, people seek student loan and thus get financial aid of all education cost during the total enrollment period. In fact, the US government has been very much conscious with this loan as the number of borrowers has emerged to a larger scale.

 

Situations that may lead you to needing a loan

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