Erasing debt is something you can only do when you have the motivation and the right tools. I’m sure you’ll be confused about the tools. Well, your debt plan is a tool. It is going to have a significant effect on your repayment process.
Therefore, choosing an effective debt plan is compulsory. To inspire you, today I’m going to shed light on two of the best debt plans. One is the debt avalanche and the other is the debt consolidation. Have a look at the details mentioned below before you choose one:
The Debt Avalanche
The debt avalanche is a kind of accelerated debt management plan. In this method, you need to allocate a significant amount of your monthly earnings to your debt payments. You make the minimum payment on all your debts and the remaining amount funds the debt with the highest interest rate.
Pros and Cons of the Debt Avalanche Method
Using the debt avalanche method, you can easily cater to debts with high interest rates. As you know, paying off debt is hard but paying it off with a high-interest fee is the hardest. The debt avalanche method simplifies the process by handling all your debts at once and taking special care of the most worrisome debt.
The only drawback of this method is that it requires you to have a prominent amount of money in your bank account every month. In case of not having enough money, your cycle of debt repayments would be disturbed, slowing down the growth and consuming more time than anticipated.
The Debt Consolidation
The second debt plan for today is debt consolidation. It is a form of refinancing your debt and getting rid of it all at once. In this method, you apply for a consolidation loan and pay all your debt in a lump-sum amount. Such a move will save you from the high amounts of interest fees you would have paid otherwise.
Pros and Cons of the Debt Consolidation
Unlike the debt avalanche that only works for people with money, debt consolidation is for everyone. If you’re having a hard time making monthly debt payments, you can always rely on a debt consolidation loan. It will fix your situation in the blink of an eye, without affecting you financially.
However, you won’t be done there as you’ll have to repay your consolidation loan in the given time. Although debt consolidation loans come with a low-interest rate, it won’t be possible to get one in case you have a bad credit score. Yes, that’s the tricky part. In order to take a debt consolidation loan, you must have a great credit score.
Lastly, I want you to know that both the debt plans mentioned above have their upsides and downsides. Analyze your situation thoroughly and once you have the right figure and timeline, pick one debt plan accordingly. I wish you good luck, my friends. Have a wonderful day ahead!