Make a list of all of your debts. Include the balance owed and the interest rate for each account you have. This way you will be able to view the full picture and it will help you come up with a plan for repayment and which one works best for you. Here are two common strategies:
• Debt Snowball Method: List all of your debts smallest to largest by amount owed. Pay minimum payments on all debts except for the smallest one. Increase your payment amount on the smaller account until it’s paid off. Once it’s paid off, take the money you were paying towards that debt, and put it towards the next debt on the list. This method will give you the quickest satisfaction and boost to keep it up.
• Debt Avalanche Method: List all of your debts in order from the highest interest rate to the lowest interest rate. Pay minimum payments on all debts, except for the debt with the highest interest rate. Increase your payment on this debt until it’s paid off. Once it’s paid off, take the money you were paying towards that debt, and put it towards the next debt on the list. This method will save you from paying more money on interest long term.
Make sure you continue to pay your minimum monthly payments on each debt before putting extra funds towards the debt you are aiming to pay off to avoid late payments and service charges.
An alternative you may wish to consider if you have several smaller debts with high interest is a loan to consolidate your debt. This option may help manage your debt and make repayments easier. Contact a Citizens Bank Personal Banker today to discuss this option further.