Credit cards are very useful when you want to buy the things that you love but don’t have enough cash to do so. You can buy such products and pay for them later when you have the money.
However, if you get into a habit of buying too many things on your credit card and can’t pay them on time, you can end up in a debt trap.
For students, it becomes really difficult to pay off student loans if their jobs are irregular or do not pay them enough money. This can result in credit card debt accumulation.
A credit card debt negatively impacts your finances. Do you know that it can hamper your chances of buying a house in the future? But how, you ask? It is because credit card debt affects your credit score, which is used by the bank to pass your home loan application.
So what do you do to pay off your credit card debt faster?
There are expert professionals who can assist you with it. For example, professionals in Chunk Finance help their clients in their debt payment journey. In this journey, they support clients to stay informed about their finances and help them manage their spending in a better way. Ultimately, they can help devise strategies that let the clients pay off their debt faster.
So what are some ways that these experts suggest to people for credit card payoffs? We have done some extensive research and came up with the following ways.
Ways to Get Out of a Credit Card Debt
1. Convert Your Outstanding Debt Into an EMI Payment Option
An EMI (equated monthly installments) is one of the easiest ways to pay your credit card debts. You can get your debt converted to EMI options and pay them in smaller chunks. This will give you an extended time for debt payment.
The only disadvantage is that the repayment money will have a small interest payment added to it. However, as it does give you some respite from your debt, it is a good idea to consider!
2. Snowball Method to Pay Off Debt
The snowball method is a very popular “self-discipline” method of credit card paydown. Here, you pay off your smallest debts every month, while paying off a small interest on your larger debts.
In time, your smaller debts are over and you move on to pay the next smaller debt. This cycle goes on until all your debt is paid. This method is motivational.
It does help to pay off your debts. However, by the snowball method, debt payment will cost you more money and time. This is because you go on to pay every penny of the debt plus its interest. The same can be avoided by the avalanche method. Read further to find out how!
3. Avalanche Method of Debt Payment
If you are someone thinking, “how can I minimize interest payments on my debt?” The avalanche method is here for you!
The avalanche method of debt payment involves paying minimum amounts on all your debt and using your extra funds to pay the loan with the highest interest first. Since you pay off your loan with the highest interest first, you will end up minimizing your overall interest payment to be made.
This strategy is beneficial when you are disciplined and follow a regular payment cycle. However, the method can go off the rail if you hit a rough patch and can’t come up with the money to pay your debts for even a month!
4. The Blizzard Method
This method combines both the snowball and avalanche methods, to give you a comprehensive loan repayment strategy. In this method, you pay the lowest amount of debt first (snowball method). After its completion, you move on to pay the loan with the highest interest rate ( avalanche method).
It is beneficial because it combines the motivational aspect of the snowball method and the disciplinary aspect of the avalanche method. This lets you pay your debt on time and also saves on interest payments.
5. Transfer Your Balance
This technique is encouraged by credit card providers to attract customers. It simply involves transferring the debt of one credit card to another credit card that charges less interest on the same debt.
It’s a better option because you end up paying less interest on your credit card debt. The downfall is that balance transfers have some added costs and limitations.
First of all, you will have to pay a balance transfer fee. It could range between 3-5℅ of the transferred amount. If you opt for a card with lower credit, you might not be able to transfer your entire debt balance also.
6. Take a Personal Loan at a Lower Rate of Interest
This method is very common and quite effective. You can take a personal loan to clear off your debt in a single installment. This personal loan can then get settled in easy EMI payments.
The benefits include saving money on high-interest debts like student loans. This is because in most cases, student loans have a higher interest rate than personal loans.
7. Top Up Loans
A top-up loan is a loan given over and above the home loan. Take, for example, your mobile phone. Just as you top it up when it runs out of low balance, the same way you can use some extra cash from the bank on top of your home loan, if you run out of money while building your house.
You can use this loan amount to pay down credit card debts. The downside is that you need to be actively paying your home loan premium for the last 2 years to avail it. It also involves a thorough investigation of your property by the bank, before they issue you the extra money.
Use our tips to manage your spending when paying debts. If one method works for a person, it doesn’t mean it will work for you as well. Research the strategy that operates the best for you. Take help from experts if necessary. You can pay your student loans faster by using our tips and tricks!
Credit cards are really useful when you are facing a cash crunch. However, this plastic money can turn into a monster, if you don’t pay attention to your expenditure. A regular payment cycle and expert opinions from experienced professionals can save you from going into credit card debt.