Debt management strategies for beginners

 Debt management strategies

You all want to get good at debt management correct?
Well today i am going to share few popular approach toward managing once debt. this are simple, easy to under and perfect for anyone who is just starting to take control of his financial life.

    Debt avalanche method

    It is the most logical approach toward eliminating debt. 1st make list of all the debt with their interest rate in order larger to smaller.

    This method involves making minimum payment of all of your debt and using the remaining money to pay highest interest rate debt 1st. This method help you save the extra money that otherwise would have gone as interest payment.

    Debt avalanche method
    Debt avalanche method

    Lets understand it with an example. Suppose you have the following list of debt.

    • 5000 credit card debt @ 17.99%
    • 4000 car loan @ 2.5%
    • 8000 student loan @ 6.00%

               Here according to avalanche method make minimum payment of all the above debt. With the money that you are left pay for your credit card as it has the highest rate of interest. Afterward once the credit card debt is eliminated go for student loan. You can save a lot of money simply by making your debt payment in particular order.

    Debt Snowball method

    The debt avalanche method is mathematically logical. But some time it can be discouraging if you don’t see immediate result even after making large debt payment. Here come the debt snowball method. It encourages and motivates to make debt payment.

    Debt Snowball method
    Debt Snowball method

    In this method make minimum payments of your all debt and with the remaining money go for smaller debt and then to the bigger one. This method way suggested by financial expert Dave Ramsey. This method give quick results.

    Debt lasso method

    This method involves consolidating your all debt and transferring it to  Zero interest credit card or low interest loan from what you are currently paying. This way you will be able to pay off you principle amount fast.

    Debt lasso method
    Debt lasso method

    This method was developed by John Schneider and David Auten.

    But there are few points to remember before going for this method. If your annual income is double your debt than this method is good for you but if your debt is double of your annual income

    For example

    If income is 15 lakhs and debt is around 7 lakhs than this method is good, but not when the condition is vice versa

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