Few things you should know to deal with debt

This article will certainly rid you of your doubts about managing debts

06:43 27 May 2014

Millions of UK citizen are experiencing deep depression because of their inability to extract themselves from the black hole that debt seemingly leads them to. 

Some reasons for contracting debts are good, such as education or payment for hospitalization, among others.  Credit card debt, however, can become tricky and can easily transform your financial status from okay to really bad.

Almost all of debt-reduction programs recommend to deal with debts with the highest interest rate first.  It could be a good advice but it does not take into account the emotional gratification earned after paying down the debt in full. 
Big debts could take a long time to settle thus making the process really tedious and hard to pursue.

Another way of dealing with debt is through the “debt snowball”.  This technique takes on the smallest debt first, and deals with the next and so on until all the debts are all paid.  Settling small debts quickly can inspire you to keep on going and may result to paying debts faster.  A study shows that individuals who deal with their debts using the debt snowball method are more likely to completely pay off their debts regardless of its duration than those who prioritise debts with high interest rates.

To give you an illustration, two individuals owed £10,000 spread over four accounts.  The person who pays two - £1,000 within a year feels more triumphant than the person who pays off one £2,000 within the same period of time.  The study further shows that comparing the two methods, those using the snowball method are 43% more like to get rid of all his debts versus the 12% for those using the other method.

If you are currently dealing with multiple debts, going by the above findings, try paying off you small debts first and gain that much-needed encouragement as you go on.