7 Debt-Reduction Strategies - Which One Works Best for You?
Has sorting through the mail become a nightmare as you find bill after bill that you just can't pay? If so, you're probably reading this because you've resolved to start chipping away at your debt, so you can sleep again at night. But first you need to select a debt-reduction strategy that's tailored to your needs.
A debt-reduction strategy helps you to plan who gets paid first, second, third, and more. While one strategy offers the lowest costs, others provide quicker emotional rewards by wiping creditors off your list more quickly.
Once you select a strategy, ZilchWorks Standard debt-reduction software can tell you exactly which bills to pay when, and lead you step-by-step towards a debt-free life.
1. Annual Percentage Rate
Even as you curb your spending, sometimes your bills mount because of astronomical interest rates. You feel as if you're paying off three times more than you borrowed in the first place. And you probably are.
Your high-interest debts are like tanks that provide the fuel that threatens to burn down your financial house. The Annual Percentage Rate debt-reduction strategy puts out these fuel-tank fires first to prevent the fire from spreading. It's the best way to stop your hard-earned money from being burned up in interest payments.
Under this strategy you pay back the creditor that charges you the highest annual percentage rate first, while paying the minimum monthly payments to other creditors. Once you've crushed the worst offender, you move on to the creditor with the next highest rate. All the payments that were going to your first priority shift to priority number two in what's called a payment snowball.
This strategy gives you the best bang for your buck.
2. Quick Elimination
Perhaps you're just tired of receiving a huge stack of bills. A few "paid in full" notices to celebrate could be the ticket to keep you motivated on your quest for debt elimination.
If so, you need the Quick Elimination debt-reduction strategy which makes the debts that are easiest to pay off your top priority. The debt with the lowest number of payments remaining comes first. If you have two debts rivaling for this position, it prioritizes the one with the higher monthly payment.
The Quick Elimination strategy may cost a little more than the Annual Percentage Rate strategy, but if it helps you stick with the program, it's worth it.
3. Lowest Balance First
The Lowest Balance First debt-reduction strategy has a subtle difference from the Quick-Elimination strategy. It prioritizes your debts based on which one has the lowest balance. Wipe away those nagging little debts and then focus full force on the big boys. After all, research shows people who pay off the smallest debts first are most successful with debt reduction.
4. Highest Balance First
If you have one or two large debts that loom so large that tackling them feels like climbing Mount Everest, you need to start to whittle these debts down and see some success. Prioritize your debts with the highest balance first and watch that towering debt melt away.
5. Lowest Payment First
Tired of multiple creditors hounding you for money? Use the lowest-payment-first debt-reduction strategy. It's assures you keep the greatest number of creditors off your back even in the most difficult financial times. This strategy puts your lowest monthly payments first.
6. Highest Payment First
Your debt with the highest monthly payment may be most critical to you. After all, this could be your mortgage, your largest investment and the roof over your head. It would be heartbreaking to see a foreclosure sign in front of your home. Select this strategy to prioritize your debts with the highest monthly payments and protect what's most important to you.
7. Customize Your Plan
Perhaps you see facets of various debt-reduction strategies you want to combine. For example, your mortgage might come first, but you also want some quick wins. Then custom-select which debt you pay first and fine-tune your plan.
How to Implement Your Debt-Reduction Strategy
Whichever debt-reduction strategy you choose, there are a lot of moving parts. But you can make it amazingly simple and stay in control by using the ZilchWorks debt-reduction software to manage your debt-reduction plan. Just fill in the blanks, specify what you can afford each month and your preferred strategy, and press the button to create your plan. Find out exactly how much to pay each creditor each month... and when your debt will vanish.
Follow the plan and watch your debt shrink away. Our customers pay 50 to 60% less in interest penalties and get out of debt 55 to 65% faster! You'll be debt-free quicker than you ever thought possible. And you don't have to confide in anyone about your financial woes. There's no credit counseling needed, and you can do it all from the privacy of your home.
Order your ZilchWorks debt-reduction software now and get on the path to debt-free living.
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zilchworks.com is owned and operated by Michael J. Riley, a retired United States Marine Corps Gunnery Sergeant. Riley's easy to use Zilch software has been helping people get themselves out of debt since 1991.