Unpaid student loans, home loans, car loans, and any other type of loan are some of the top reasons people seek bankruptcy. By staying up to date with your loan payments, not only are you improving your financial health and credit score, but you’re saving money as well. Remember, the faster you pay off your loans, the less you have to pay your lender in terms of interest.
Best Plans for Paying Off Debt from Loans
If you’ve been making the required monthly payments on your loans, its time to consider various strategies to pay off your debt faster and save you money! These strategies boost your financial profile and help you avoid the need for bankruptcy.
1. Debt Snowball Technique. With this strategy that was popularized by Dave Ramsey, you want to pay the loans with the smallest balance first. The reason this technique is so popular is because it gives you motivation and measurable progress as you eliminate your debt. As the smaller loans are paid off, you are given benchmarks that motivate you to continue paying off your debt. This option is best for people who lack the motivation to pay back their loans on time, but isn’t recommended for those who are already financially disciplined.
2. Interest Rate Technique. This strategy is focused on paying back the loans with the highest interest rate first, accelerating them whenever you can afford it. Since you’re paying off these loans first, the high interest rates have less time to accumulate, thereby saving you money. While both techniques save you money, focusing on higher interest rates places more money back into your pocket.
Regardless of which technique you decide to follow, the most important element is to stay consistent with your loan payments. If you ever have to miss a payment, maintain open and transparent communication with your lender. If a Dallas bankruptcy becomes necessary, still keep control of your finances as much as possible to stabilize your financial life.