Living your life with debt hanging on your head is no less than a pain in the neck. It not only disturbs the quality of your life but also acts as a stumbling block on your way to financial progress.
The question is, how to get rid of debt? How do you get things in order financially? How to finally move towards financial stability? It could be extremely difficult if you don’t follow a proper strategy or plan things out. Well, you need not worry anymore.
In order to adopt a strategy, you need to know about it first. Thus, knowing about different ways to manage debt is the first thing. In this article today, I’m going to shed light on debt consolidation and the debt snowball method. Let’s see how different and effective they are and which one would be better for you. Have a look:
Debt consolidation is among the most popular debt repayment methods. It’s often adopted by governments and private companies for repaying corporate debts. In debt consolidation, you take a consolidation loan to refinance your existing debt. Apart from the state level and corporate use, student debt consolidation has also become a thing now, given its benefits.
Pros and Cons of Debt Consolidation
The debt that comes with a bulk of a high-interest rate is often the biggest concern for most people. Paying off debt is one thing, but paying off the interest is entirely another story. Thus, one needs to take many things into account when choosing a debt repayment strategy. Plus, all debt repayment strategies come with their own merits and demerits.
Among the primary benefits of debt consolidation, the best one is that it relieves you from the burden of interest fees. That’s right, guys! When you pay all your debt at once, it saves you a considerable amount of money that you were going to direct to the interest fees.
The only downside is that you won’t be entirely free of debt. Once you get done with your existing debt, you’ll have to pay the debt consolidation loan. Although it comes with little interest fee, it’s still debt that you need to pay back. Hence, another thing to worry about.
The Debt Snowball Method
The second option is the debt snowball method. In my personal opinion, it is beneficial for debts with low-interest rates. That being said, it isn’t the best choice for credit card debts. In the snowball method, you address the smallest debt first and gradually move to the bigger ones.
Pros and Cons of the Debt Snowball Method
Like the debt consolidation method, this one also has certain merits and demerits. The good thing is that it keeps you motivated. When you get done with one of your debts even if it’s a small one, it gives you a sense of achievement. In precise words, this debt repayment method brings along instant gratification, unlike others that are time-consuming.
However, it leaves a major problem behind. It doesn’t address the issue of the accumulating interest fees. The amount you need to pay back keeps on growing, given the interest fees and you remain in a struggling position financially.
The Final Word…
Apart from the debt repayment methods mentioned above, certain other things can help you in the process. You need to make a few lifestyle changes, including sticking to a budget, cutting back on expenses, increasing earnings, and more. Such lifestyle changes will make the entire process relatively easy. I hope this guide helps you out, my friends! Here’s wishing you a wonderful day ahead!