When looking to escape the trap of debt, it’s easy to get overwhelmed by the wide range of suggestions, options, and products aimed at helping people become debt free. Of the three popular approaches, are any the best answer?
- Destroy your plastic. Financial author Dave Ramsey recommends listing all debts, except the house in order, then paying the debts oneby one from smallest to largest.
- Balance transfers. Banks will actually compete for your debt. They offer very low introductory rates if you move your debt from another bank. If you use this tactic, have a plan for the end of the promotional period when the interest rate will rise.
- Personal loans. Borrowing a fixed amount of money at a fixed interestrate for a fixed period of time. This strategy may be useful if you have a good credit score, and you won’t be tempted to use the credit cards once their balances are paid by the loan.
Both balance transfers and personal loans create more available credit, which is a recipe for disaster, when we don’t adjust our spending downwards. These options only make sense with a disciplined, realistic budget.
“Today, there are three kinds of people: the have’s, the have-not’s, and the have-not-paid-for-what-they-have’s.” Earl Wilson