Money

The most effective way to pay off debt

1. In the first place – with the highest reduced rate
This would seem obvious, but many people try to extinguish the first small loans to pay at least a part of it. In this case, you overpay the interest of service, so that the total sum obtained is bigger. For example, you have one loan at 13% per annum, the second – at 10%. For the same loan amount, focus on payments of 13 per cent loan, paying the minimum payments on the other.
You will have to pay the interest any way, but in such a way you will make them smaller.

Tip: Calculate loans: extinguish those that are profitable, but not those you want to.

2. If the calculations of several loans are approximately equal
Reverse method: if you have several loans with equal charges, extinguish the least one. This so-called “snowball method”: repayment of a loan motivates you to put out next, and you reduce their number. For most people it’s easier, and they subconsciously incline to this method. Please note that if you are threatened with confiscation, or in one of the loans calculation is clearly greater, this method is excluded, extinguish a larger loan, as described above!

Tip: If you have equal debts try to close a particular loan

3. Restructuring and Refinancing
If you took a large sum for business development or purchase of apartment, and have paid at least one-third, you can ask about the restructuring. It is profitable in that case, if now bank gives for the same purpose loans at lower interest rates. They can make advance, and you’ll get not only the reduction in total debt, but also the extension of the new loan. That is, you can take advantage of the restructuring to reduce the monthly payment, increasing the total term of the loan. Restructuring makes sense when interest rates are substantially different, as when formalizing everything you have to pay the commission and some other payments, so carefully calculated profits.
By the way, not all banks agree to refinance their own loans, so that you can try to sell the loan to another bank.

Tip: If you cannot pay – restructure: restructuring will gather all into one payment and reduce the monthly sum.

4. Repayment of the loan from another account
If you want to repay the loan with other bank credit card on which you have no debt, and there is a certain amount of money, which you can use, make sure that it is profitable. Even if you can use the amount at 0%, there are always commissions related to transactions, so that you will lose some money, but at the same time increase the amount of credits that you have to put out at a time. If you choose this method, to calculate the amount of the debt, divide the number of months during which the acts interest-free loan, and make sure that you have enough funds to pay off.

Tip: Keep out of penalties: use other loans, if the situation requires.

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