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Highest Interest Debt Paid First

By | Credit Scores, Debt, Personal Finance

The path to financial freedom can seem like a twisting, turning road with no end in sight. You make your monthly payments, but the bills continue to grow, and it seems as if there has been little change in your monthly balance. To many, it seems like the easiest way to eliminate debt is to find the bill with the lowest balance and pay it off first. Not paying attention to the interest rates, however, can end up costing you more money in the long run. Luckily, our Highest Interest Paid First schedule will help set you on the right path to a debt-free life.

It costs you more money each month to carry a balance on a high-interest-rate credit card. By paying off your highest-interest-rate debt first, you not only speed up the ability to eliminate your debt, you save more money in the long run.

For example, assume that you have $150 to put toward your debt each month and that you carry a balance of $3,000 on one line of credit with an interest rate of 22 percent and that you have another line of credit with a balance of $1,500 and an interest rate of 12 percent. If you pay off the lower balance first, it will take you 42 months to pay off both balances, and you will pay $1,764 in interest. However, if you pay off the higher-interest line of credit first, you only pay $1,283 in interest and can pay off both cards in 39 months. You not only pay off your debt 3 months earlier, but you also save $481 in interest by paying of the higher-interest debt first.

When you are paying enormous amounts of money each month on interest, it matters very little how much you carry on your balance. This schedule will pay of the highest-interest debt first. If you have two debts with the same interest rate, then the debt with the lowest balance will be paid first. Any discretionary funds you may have each month will be applied to the highest-interest debt only.

Using this schedule means that debts with high balances yet low interest rates will be open for longer. While that may seem like a scary and almost backwards approach, paying highest interest debt first always results in paying less total interest.

Highest Interest Paid First helps you pave your own path to a debt-free life, while saving you time and money. It is important to think long-term and evaluate the best overall approach to eliminating your debt permanently, instead of just knocking off low-balance debt first. You are on your way to financial freedom; let Ovation Tools help you complete your journey.

Minimum Payments with Snowball

By | Credit Cards, Credit Repair, Debt, Your Credit

You have been making an honest effort to pay off your debts. Each month, with the money you have diligently set aside, you make a payment above the minimum balance to all of your accounts. Unfortunately, progress is slow. You are barely making a dent and the thought of continuing this pattern for several years to come is just painful. With no extra funds for higher payments, it is easy to feel like debt has swallowed you whole. Luckily, Ovation has the perfect tool.

Sometimes paying more than the minimum balance isn’t enough, particularly if the debt is substantial. Although initially it may sound like we are telling you to do the very thing we always advise against, desperate times call for desperate measures. Besides, the Minimum Payments with Snowball tool is no ordinary payment schedule. When using this strategy, only the minimum payments will be made for each debt. The funds that are leftover from what you budgeted for monthly payments can then be applied to the account with the highest interest rate.

This schedule uses the newly freed funds to pay down your other debts at a much quicker pace. As you continue to make payments, the amount of money available after making minimum payments will grow. By making these minimum payments, you are still meeting the required monthly demands, while allotting more money to a specific account. This will always result in paying off debts faster than with minimum payments alone.

The snowball effect that is implied is quite accurate. With each debt that is paid off, there are more funds available. For example, you may owe $500, $1,000 and $2,000 on three different cards. If you have $300 per month to spend on paying down debt and the minimum payments only total $200, rather than spreading that extra $100 to all three cards, focus all of it on the card with the highest interest rate. As soon as one account is fully paid off, you then have $150 extra to pay toward the other two.

For people with multiple accounts, those extra funds could add up quickly.

Minimum Payment with Snowball provides results you can see at a faster pace, ultimately reducing your debt. The biggest advantage of this plan is that it requires no additional funds to be set aside, which is great for those working with a tight budget. This plan, combined with frugal spending, can make you debt-free in no time. Financial freedom is accessible through several other Ovation Tools as well, allowing you to find the perfect individualized payment plan.

How to Not Get Out Of Debt

By | Ask a Credit Expert, Featured, Personal Finance

Paying bills is not something you look forward to. Signing away your hard-earned money can be downright painful, but it has to be done. You squeak by with the minimum payment each month, just enough to prevent the creditors from hounding you at your doorstep.

The good thing is, as long as you continue to make faithful payments, the credit card companies won’t say a word. The bad thing is, with a minimum payment only, you are likely to be in their treacherous grasp for several years to come. Of course the creditors aren’t going to complain. They have you right where they want you.

The minimum payment is assurance for the creditors that you have to at least give them something each month. Without it, we would always find an excuse to pay them later. Later might become never for some people, which is simply not good for business. However, credit card companies aren’t doing you any favors by accepting a low amount. A minimum payment only is our least favorite tool, and it is most damaging to your credit.

When purchasing an item such as a car, lenders will tell you that with a specific payment each month, it will take you a certain amount of time to pay it off. Creditors are not nearly as helpful. Certainly, they give you a minimum payment, but it is not related to the time it will take you to pay off your debt. In reality, it isn’t related to anything other than the fact that you owe them money. This may come as a surprise, but creditors are not in the position of helping you pay off what you owe. A minimum monthly requirement is just standard procedure.

The minimum payment may save you money month to month, but it will only hurt you in the long run. If you only make the minimum payment every month, you will accrue enough interest over time to keep you in debt. The longer you owe, the higher your interest rate will be, and the happier the credit card companies are. You can try to fool yourself into thinking that you are making a dent by making a minimum payment, but all you are doing is extending your prison sentence.

To avoid eternal debt, the minimum payment should be an indication of what not to pay. Minimum payments should be reserved for emergencies, when you are truly strapped for cash, not as a simple convenience. There are several much more helpful Ovation Tools that will aid you in repairing your credit. Choose one that works for you, and pay off your debt in a reasonable amount of time.

Ovation Favorite Tool: Two Is Better Than One

By | Credit Repair, Credit Scores, Debt, Your Credit

In love, two hearts are better than one; when solving puzzles, two heads are often better than one; when playing poker, two aces are better than one. But did you know that two credit card payments in a month can also be better than one?

Debt is a hole that is easy to fall into yet difficult to climb out of. During the “honeymoon phase,” when you initially sign up for a credit card and enjoy greater spending power, you may have a difficult time peering into the future. You may not realize how quickly the balance on that card will grow once you begin using it. When you start using your credit card statements as coasters rather than a tool to manage your spending habits, it soon becomes time to take action and face the numbers.

Ovation has a number of tools available for those who are ready to attack their debt full-force. One of Ovation’s favorite financial tools is Bimonthly Payments. Bimonthly payments allow you to reduce your debt at a greater pace, ultimately decreasing interest and improving your credit score sooner than later.  This tool is great for reducing stress and for reducing your monthly balance quickly.

There are several benefits to bimonthly payments, and if you receive a paycheck every two weeks, it’s even easier to accomplish. By coordinating your credit card payments with receipt of your paycheck, you will have created an easy reminder to ensure you pay the bill on time or early each month; you can also set up automatic payments to coincide with your paycheck deposit, putting the money to good use before it ends up being spent somewhere else. Additionally, when a payment is divided into two equal halves, the financial impact has much less of a sting compared to paying one larger amount.

Initially, two split payments may not appear to make an impact. However, a half-payment every two weeks results in 26 payments, the same as making 13 monthly payments in a 12-month period. You will pay off your debt more quickly while reducing the amount of interest you have to pay, since interest accrues on most cards daily.

As you establish better spending habits, you may have more money some weeks. Take advantage of this extra cash when you can, to increase your payment amount. Bimonthly payments are a great option for reducing your debt. Although it may be painful to pay the credit card companies more than once a month, you will see a measurable difference in your balance before too long.

Our Favorite Ovation Tool: Pay Off Highest Balance First

By | Credit Cards, Debt, MasterCard, Revolving Debt, Visa

Debt can be a heavy burden. While each payment slowly but surely helps you dig your way out of the debt hole, sometimes it only seems to get worse as time goes on. Your credit card payments start to resemble a game of roulette, and before you know it, you are sending the bare minimum to whatever bill comes your way first, doing what you can to keep your head above water.

It’s time to be honest with yourself. Is your payment schedule really helping you, or is it bringing you closer to financial – and mental – instability? Ovation has a payment tool that can restore your sanity.

Ovation has several financial tools designed to help you pay down your debts faster and save you the most money possible. The different payment schedules cater to individual needs, not only to rid you of pesky debts but to help you restore your credit as well. One of our favorite tools is the one in which you pay off your highest balance first.

Every debt comes with interest, and the more you owe, the more interest accumulates. This snowball effect packs quite a punch if not monitored. Therefore, rather than bouncing between different payments, choose to focus on paying the debt with the highest balance first. As tempting as it may be, resist the urge to deviate to other payments if at all possible. Once your highest debt has been paid off, continue to the next highest debt and begin to pay off that balance. Continue this process until you are debt free, at which time you can congratulate yourself on your victory in the battle against unmanageable debt.

Paying off the highest balance first is beneficial in several ways. Foremost, it is easier to manage. Payments are much less daunting when you are focused on one item on your list instead of several. Remember, your sanity is just as important as your financial stability. Paying off the highest debt also improves your credit scores. A high balance, especially if it is over 50% of the amount available on the card, equals a low credit score, and bad credit can limit you in a number of ways.

This helpful online tool is incredibly easy to use. With Ovation’s Highest Balance First Tool, you simply input your debt, and a payment schedule is created for you. Rather than keep up with the juggling act you have been performing, you can pay off your debts quickly. Our tools help you relieve debt and restore credit, granting you the serenity – and sanity – that you may have been missing.

Favorite Ovation Tool: Lowest Balance Paid First

By | Ask a Credit Expert, Credit Cards, Personal Finance

So you want to pay off your debt and want to know the best way to go about it. Our Tools page lists seven ways: Minimum Payments Only, Minimum Payments With Snowball, Lowest Balance Paid First, Highest Balance Paid First, Highest Interest Paid First, Split Discretionary Evenly, and Bimonthly Payments.

Which is best? As in most things, it depends on your situation and your budget. You have to ask yourself what’s more important: the morale boost of a quick payoff, reduced interest payments, the satisfaction of paying off a large balance, or the stability of a well-defined payoff schedule?

Lowest Balance Paid First is the best choice for a number of reasons.  First, if you’ve run up a large debt across several accounts, you’re likely to be over-extended. And that means that your discretionary cash (money you have remaining after making minimum payments on your debt, paying your monthly bills such as rent or mortgage, utilities, and insurance, and paying for food, incidentals, and entertainment) is likely to be somewhat limited.

However much it is, applying your payment to the lowest balance first has a multiplying effect because it’s a significant percentage of the total owed. That added amount, when combined with the minimum amount, will drive the debt’s balance to zero relatively quickly. Just be careful that you don’t add to that debt or add to your debt in a different account. Sticking to the plan and actually paying off that first card will give you a huge morale boost, as will adding the now freed up money to the next lowest balance.

Suppose your lowest balance debt is $2,000, the interest rate is 14% and the minimum monthly payment is $75. According to the payment schedule on the Tools page, your last payment will be January 2015, and you’ll pay $410 in interest. Now suppose you can pay an additional $50 a month. Your last payment will be October 2013, and you’ll have paid $227 in interest, a reduction of $183. You now have $125 to add to your monthly payment on the lowest balance of your remaining debt, and you haven’t needed to make any additional changes to your budget.  As a bonus, you begin paying that down 15 months sooner.

Lowest Balance Paid First is a great tool for managing your credit debt. Your choice may be different depending on your situation. Whichever tool you choose, keep in mind that your primary focus should always be to eliminate your debt.

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