The Fastest Way To Pay Off Debt

want to take a loan but have apprehensions regarding how to pay it back. Well there are different ways in which you can decide what and how it is to be paid back.

There's some debate among financial planners as to the best way to pay down debt. Some say paying the highest interest rate debt first is the best way; others say paying the smallest balance first is the best way.

Both methods have advantages and disadvantages and it is upto the organisation to choose which method they want to follow. In certain situations one method will be helpful and in others the second method.

The two methods are:

• Highest Interest Rate: In this method, you focus on paying off your highest interest rate debts first. The basic steps in this method include:
  
  1. List all debts in order from the highest interest rate to the lowest interest rate.
  2. Commit to paying the minimum payment on every debt.
  3. Determine how much extra can be applied to the highest interest rate debt.
  4. Pay the minimum amount plus the extra amount towards the debt with the highest interest rate until it is paid off.
  5. When that debt is paid off, apply the amount you were paying to the debt that is paid off to the next highest interest rate debt until paid off.
  6. Repeat until all debts are paid in full.
  

• Lowest Balance: In this method, your focus is on the debt with the lowest balance. Note: this method was made popular by Dave Ramsey and is often called the Debt Snowball method.
  
  The basic steps in this method include:
  
  1. List all debts in order from the smallest balance to the largest balance.
  2. Commit to paying the minimum payment on every debt.
  3. Determine how much extra can be applied to the smallest balance debt.
  4. Pay the minimum amount plus the extra amount towards the debt with the smallest balance until it is paid off.
  5. When that debt is paid off, apply the amount you were paying to the debt that is paid off to the next smallest balance debt until paid off.
  6. Repeat until all debts are paid in full.

Try choosing the method which coincides well with yours and well the needs of the person who has given you that loan. This will not only take care of your side of concerns but also his side.