Debt Payoff Methods: An Overview

Introduction

Debt consolidation and many other payoff methods are something that thousands of people really need. Every month, there are millions of bills that come in. There are health insurance, student financing payment, car loans, home utilities, rent or mortgage, cable, cell phone, gas, groceries, and cables that need to be paid. And the time you get done with one of those, the next round is already due. No doubt you have probably desire that there was an easier way to do all of this. The good news is that there are many ways available to completely payoff your debt through different debt consolidation methods. Through these ways, you’ll end up with fewer payments that need to be paid every month, saving you lots of time and money. If you are one of those people who are facing huge credit and debt, you are not alone. Recession has left a lot of people in similar situation. If even you monthly minimum payments are too much, you may already want an effective way out. There are a lot of options available for you to pay off your debts. Here are some of the most effective ways to pay-off your debts in the shortest time possible:

Snowball Debt Reduction Process

Have you ever seen a snowball rolling down a hill? Such situation presents a small snowball rolling down the hill and when it reaches the bottom of the hill, it has grown huge because of the entire snow it collected on its way down. This is a similar concept wherein the snowball debt reduction process works. You start with small payment and let them grow overtime. This can be achieved by expanding your monthly payments on your credit cards. This debt reduction process isn’t a random one. It follows some deliberate steps. The very first step is to make the commitment to pay the entire minimum monthly payment on your entire cards. So, if you have 4 credit cards with the balances on them, you should make the monthly minimum payments on 3 of the 4 credit cards without fail. On your 4th card, you will pay the monthly minimum payments with an additional amount. The additional amount will be at whatever you can possibly afford.

Annual Percentage Rate

The rate of interest which is applied for the entire year on credit, loan and mortgage loan rather than of the monthly interest rates is known as the annual percentage rate. The other referring forms to annual rates are the nominal EAR, APR, or the effective APR. This rate of interest is a financed change expressed as annual rate. These terms have legal and formal definition in other countries which are limited to certain jurisdictions. Generally, nominal APR implies to the simple-interest rate annual while the effective APR is the amount added to the compound rate of interest yearly. APR (Annual Percentage Rate) is considered as the simplified form of the effective interest that the borrower pays on the secured loan. In other jurisdictions and a few countries, the consumer protection needs the banks or lenders to disclose amount borrowed in the standard form.

Bitcoin

Bitcoin offers BTCjam – a unique way to consolidate your debt into a personal unsecured loan. What make this very unique is that the financing is done through the use of Bitcoins instead of real money or dollars. The use of Bitcoins will reduce the involved cost in managing the loan payments and the loan itself. With much fewer cost, the loans can post a much higher return in order to attract more investors. BTCjam uses their propriety Global Credit Score algorithm in order to accurate assess each of the loan’s risks. The investors can select the risk level they want to be tolerated. The investors are widely encouraged to fund the different kinds of loans, which in return further reduces the risks involved. Because BTCjam investment is very attractive, the borrowers can get the advantage of large pool of investors in order to fund their current existing loans. The borrowers can possibly define the rate of interest they want to pay and the ways on how the loan will be paid. The rate of interest is much lower as compared to those you would find at lending institutions and banks. BTCjam isn't the only platform out there either Loanbase is another P2P Lending platform with Bitcoin; Loanbase also has its own credit scoring system for borrowers.

Traditional P2P Lending Platforms

P2P (Peer-to-Peer) Lending is also a way that connects the lenders and borrowers directly, bypassing the intermediaries like banks and the credit card companies that have monopolized lending industry. Because of this, it has resulted in much greater returns for the investors and lower rates of interest for the borrowers. P2P Platforms are very attractive to both the lender and borrowers for several reasons. There’s much lower loan threshold, allowing the borrows to, for example, consolidate their debts on their credit cards at much lower rate than what is offered by the credit card companies. On the lenders’ side the investments can possibly start at $25 without any fees taken, giving those with small savings amount a great investment vehicle. The rates of interest vary from 6 percent to as high as 30 percent depending on the profile’s risk. Comparing that to 0 percent paid by the banks to the lenders – also known as the account holders – at it clearly shows why the P2P Lending platforms have successfully taken off.

Collateral/Secured Debt Consolidation

Secured debt consolidation is often considered as the worst kind of consolidation because it poses great risk to the borrower. This involves using the borrower’s asset, such as vehicle or home, as a collateral or security for the loan. While secured debt consolidation makes the loan lesser risks for the lenders, it is much more risky for the borrowers because of the fact that the borrowers may lose their asset if they fail to completely repay the loan.

Conclusion

If you want to become debt-free, paying off your credit card debt or loan early will save your money in the interest and decrease the overall term of loan. There are many payoff methods you can possibly use and just imagine what you could possibly do with your money without loans to be paid off – make home improvements, save for retirement, and a complete peace of mind.

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