hr: Money

Having a large amount in debt can feel like having the sword of Damocles hovering above your head. If you don’t pay off your debt, you know that sooner rather than later, it’s going to strike you.

If you’re in debt, like most people nowadays are, the only way to get out of it is by having a systematic and rational approach to paying it off. And here are some practical ways to do it:

• Pay above the minimum when your installment becomes due. The longer it takes for you to apply payments to the principal the more the interests will pile up, and the less cash remain with you. Exactly the reason why banks are making money and you’re not. You need to tighten your belt each month when you make your payment, and apply as much as you can to the principal. Overtime, this will greatly reduce the amount you pay in interest.

• If you have several debts, transfer higher interest debts to the one with the lowest interest rate. Many credit cards allow this, and it’s really a good move to trade a high interest debt for one with a much lower rate any time. When your card balance reaches zero, move on to the next card and do the same.

• Take advantage of promotional offers by banks. These are usually attractive offers that will save you a lot of dollars in interest. You can then use the money saved to pay the principal.

• Cash in on your savings account to pay your debts. At first this would seem like a stupid idea, but try comparing how much your savings account earns in interest against that of your debt’s, and you’ll see that this isn’t such a bad idea after all.

• If you have life insurance with cash value, try borrowing against the policy. The interest of this borrowed cash will be way below commercial rates. And transferring your debt to one that charges a much lower rate will bring down the amount you’ll have to pay in interest almost instantly.

These are not the only things you can do. There are other countless ways to minimize your exposure to high interest rates to help pay off your debts. You will learn a lot as you proceed.

Just like a great chess player, you should learn to think several steps ahead of your opponent. Think, think, think, and think hard. Try not to let creditors outsmart you, if they haven’t done that already. Good luck.