Most people these days are even scared to open their mail because of a large number of bills that they might find. For you to be at peace again, you need to familiarize yourself with some debt reduction strategies that are specifically made for you. A debt reduction strategy will help you decide which debts to pay first. Each strategy offers a different kind of solution. Let us take a look at the debt reduction strategies.
Debt reduction strategies
Yearly percentage rates
You could be very good at following budgets and keeping your spending low, but sometimes you end up in debt because interest rates are very high. By using this strategy, you can first pay off the creditor that has the highest annual rates. You keep doing this as you keep going to the next one that has the second highest rates.
This strategy is also known as the quick elimination strategy. What this does is it helps you to do away with those debts that are the simplest to pay and the easiest to do away with. If you use this method, then you will pay off the debt that has remained with the least number of payments coming up. This strategy could cost you more than the yearly percentage rate strategy, but it is very efficient.
Lowest balance first
This debt reduction strategy is similar to the elimination strategy. However, it gives priority to the debts that have remained with the lowest balance. These are paid off first. Do away with the little debts that will pester you for nothing.
Highest balance first
You might be having one or two of those debts that are so large that threaten your financial existence. What you should do is to start chipping away at these large debts, and you will start to see success coming your way once you start dealing with them.
Lowest payment first
You have many creditors breathing fire under your neck, and you do not know how to handle them. Begin by paying off the lowest monthly payments. This strategy ensures that you first pay off your lowest payments all the way to the highest.
Highest payment first
This strategy ensures you pay off your highest monthly payments first because these could be the most crucial like your mortgage or a very large important investment.