The Best Way To Get Debt Free
Most people think that the easiest way to get debt free is to pay off as much money as they can each month with a view of clearing the entire debt. Whilst this is indeed true, the more you pay, the less you owe, it is not the only debt management technique that can be used to get out of debt. The key to becoming debt free is paying the most of your actual debt month to month, not just the total amount you’re paying.
That might sound confusing, but imagine you have 2 credit cards, each of them have a maxed out limit of £4000. The typical month to month interest rates on these cards will cost you payments of around £150 each, or £300 total. Now, of that £300, you’re only paying around £50 off your £8,000 debt – so it’s costing you £300 to clear £50 of debt – which is obviously not good debt management. In this case, you could take out an £8,000 loan to pay these off, if you structured your payments at £300 per month, the same as you were paying anyway, you could be paying £250 off your actual debt and only £50 interest, in most cases even less than that. So you’re paying the same amount, but you’re clearing a lot more off the actual money owed.