Best strategies to pay your credits
September 9, 2019
In our country, families owe, on average, about 50% of their income. According to a study by Rosie Bank, half of the country’s households have some type of debt and 8% are over indebted.
12% of Mexican families need more than one year of income to pay off their debts, while most of them only have a year or less to pay all their credits, the problem is that they don’t know how. In Olivia Count we help you find the path that best suits you to reach financial freedom, through 3 steps.
Get an overview of your debts
Visualizing our current situation regarding debts is difficult, simply because seeing reality can be very painful. However, having an overview of our debt will allow us to choose the best way to reduce it.
You must make a list of all your debts and record the payment terms of each one, as well as the amount to be paid, the interest rate, the minimum monthly payment and the commissions accrued for non-payment. You can do this by hand in a notebook, on an Excel sheet or on electronic platforms, such as Olivia Count, which helps you concentrate all your financial information in one place and will allow you to have an overview of the debt you have.
Renegotiate or consolidate your debt
The next step is to try to negotiate debts with the highest interest rates with the institutions with which they contracted, this can be difficult, but for example, with credit cards you can always create a payment plan with your bank debt to months without interest. You can also consolidate all your debts into one, in which you have the lowest interest rate. Consolidating your debts can work for you if it is hard for you to keep track of all your credits, their dates and payment amounts, interest rates, etc. You just have to make sure that the cost of opening and the penalties for paying the debt in advance (if they exist) are less than the benefits obtained by the consolidation.
Choose a strategy to end your debts
“The snow ball”
This method consists in paying off the debts in advance, starting with the ones of lesser value. If, for example, you have three credits and you owe $ 10,000, $ 15,000 and $ 20,000, respectively; in that order you must work to liquidate them.
This method involves paying as much as you can each month to settle the credit with the lowest balance, while making minimum payments to the other credits.
The method is called “snowball” because the amounts add up. The amount you pay to the second loan is the combination of what you paid to the first plus the minimum amount you dedicated to the second. You must follow this criterion until you pay most of your credits and become debt free.