When you’re struggling to pay off debt to payday loan lenders, credit cards, and other lenders, your first instinct may be to pay off the biggest payment. This may help you in the short term, but usually isn’t the wisest thing to do when you want to eliminate your debt as soon as possible.
When you get deep into debt, it often can feel like there is no way out. However, there are proven methods to change your financial picture and it usually involves paying off payday loan lenders before others.
One of the best ways to do this is the snowball method. This is basically designed to start out small and then gain momentum and make bigger payments on your debt as you go, much like a snowball growing in size as it rolls downhill.
There are actually two ways to do this. Both involve paying the minimum payment on all your debts except one that you choose to focus on to pay off. The difference between the two is how you choose which debt to go after first.
One way is to pick the debt with the highest interest rate. This is the most financially sound way to go because you’re eliminating the debt that is costing you the most in interest.
The other option is to pick the smallest debt to pay off first. This is quite popular because of the psychological boost it gives because you can pay off the debt more quickly and see tangible results of your efforts sooner.
No matter which way you choose to go, you more than likely will end up paying off payday loan lenders first because payday loans have very high interest rates and tend to be smaller because they are just meant to be short-term fixes to get you through to your next payday.
Once you have paid off the payday loan, then you apply the money you were sending to the payday loan each month and you apply that to the next debt on your list. You continue this process until you are applying all the money you were sending to various lenders to the last debt on your list.
As you can see, you will end up being able to make large payments to lenders towards the end of the process, so it could get you out of debt relatively quickly. The hard part will be staying focused on the process and making sure you are paying down the principle on one debt and not just the minimum.
This will usually require sacrifices and if you have taken more than one or two payday loans, you probably have had difficulty in making financial sacrifices. However, if you want to change your financial future, you will have to learn to say to no to unnecessary spending.
If an emergency does arise, as it probably will, don’t be discouraged and give up if you can’t pay down the principle on the primary debt you are paying off for a month or two. It may delay the process, but you can continue where you left off after a couple months when you have recovered financially.
And if the emergency hits harder than you are prepared for, it’s nice to know payday loan lenders are there to help you out when needed.