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MONEY
2020 TM
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Rank Your Debts In Order
- Pro-Rate Method
- Pro-rate your credit payments. For example, if your income is $1800 per month, you may be able to safely afford to use $1800 divided by 5 or $360 for paying debts. If your credit payments are $420 per month, you could divide the $360 (what you can afford) by $420 (what you owe) and pay 86% of the monthly amount due on each of your bills. Contact creditors to request a reduced rate or frozen intrest until your debt is paid off.
- Low-Balance Method
- Pay off bills with the lowest balance due. For example, if you owe only 2 more payments on your car or washing machine, you may want to pay those off first. Then the money you used for those payments can go to pay off other debts. (see Powerpay)
- High Interest Method
- Pay off those with the highest interest rate first. Interest charges may be very costly. Interest on some credit cards can be over 20%. Paying off those debts with the highest interest rates can free more of your money to pay on other loans. (see Powerpay)
- Most Important method
- Pay those debts which are most important to your credit rating or to keep your family safe. For example, you need to pay for rent, utilities and groceries. You may need to make a payment on the car to keep it from being repossessed. You may need to pay on a loan to prevent having your wages garnished. Other debts may not be as immediatetly important and you can wait to pay those back.
- New Plan Method
- You could work with your creditors to set up a new payment plan for your debts. This idea works well with utility companies when you have, high winter bills and lower summer bills.
- Debt Consolidation
- You could get a loan to pay off all your debts. The payments on the consolidation loan would be less than your current monthly payments now because they are spread out over a longer period of time. Monthly payments will be lower, but in the end it will cost more because you will pay more in interest. If you do this, you should stop using your credit cards and do not take out any other loans.
