If you want an effective strategy for debt repayment, particularly if you are burdened with multiple debts, then it’s best to focus on one debt at a time. Here are reasons why you should concentrate your efforts on paying off one debt at a time whilst maintaining a minimum payment on your other debts.
Interest Savings
If you target the debt with the highest interest rate, you can save more money on interest charges. High interest debt will continue to accumulate interest until it’s paid off. Focusing on paying it off first will reduce the overall interest you have to pay. This minimizes the cost of borrowing and accelerates your progress to becoming debt free.
Simplify your Approach
Managing several debts is complex and overwhelming. However, concentrating on one debt at a time will simplify the process. Making extra payments towards a single high interest debt, whilst maintaining minimum payments on your other debts will help in minimizing your overall debts.
Avoid Minimum Payment Trap
Paying the minimum amount on multiple debts will cost you more in interest rather than reducing the principal balance. Focusing on one debt will allow you to make extra payments and eliminate that debt.
Reduce Decision Fatigue
With multiple debts, distributing your funds amongst them can be a challenge. Focusing on one debt will simplify the process. Allocate more money towards one debt until it is paid off, then move on to the next debt. This gives clarity and allows you to stay focused on your goals.