Will Suze Orman’s debt repayment method work for you?
Paying off debt can be a huge challenge. Determining the best way to approach money owed can be difficult, especially if you have several different loans and credit cards to pay off and only have a limited amount to pay.
There are many different approaches to debt repayment that financial experts suggest trying when working to become debt free. One such option is the rollover method suggested by finance guru Suze Orman.
But how does this method work and could it be the best choice for you?
What is the debt repayment method?
Orman’s progressive repayment method involves following a few specific steps:
- Focus on paying off your highest interest rate loans first (while making minimum payments on all debts). You should pay as much as possible each month for the highest rate loan so that you can pay off your debt faster. However, Orman advises making sure you stay within your budget. She also says don’t pick a payment that’s too high to be comfortable with because you may not be able to meet your repayment plan otherwise — which can be discouraging.
- Postpone payments you were making on your debt with the next highest rate as soon as a credit card Where the loan is fully repaid. For example, suppose you are paying $200 per month on your highest rate debt. Once that debt is paid off, you’ll add that $200 per month to the minimum payment you were making on the loan with the next highest rate.
This technique helps you decide which debt to pay off first. And it helps you build momentum as you shift each debt payment to the next loan you focus on after each debt is finally paid off.
Could the roll-down method work for you?
The roll-down method is very similar to the approach taken by another personal finance guru, Dave Ramsey. But Ramsey describes his method as snowball method and he advises focusing on paying off your loan with the lowest balance first, then deferring that payment to the loan with the next lowest balance and so on until you are free to any debt.
Ramsey thinks his snowball method is the best because you get quick wins by focusing on a low debt balance, so you stay motivated. But Orman’s approach has the advantage of saving you more money in interest. Since you tackle your debt based on which is more expensive, you can get rid of the most expensive debts sooner with his approach. With the Ramsey Technique, you could find yourself stuck paying a fortune in interest on expensive, expensive debt. In effect, you focus on paying off cheaper loans with smaller balances for months or years before tackling the larger, more expensive loans.
Ultimately, if you feel like you’re going to have a hard time sticking to your debt repayment plan, the psychological benefits of Ramsey’s approach might outweigh the additional interest charges you risk. to incur. If his approach helps you stick to a profitability plan that you wouldn’t otherwise continue to work on, you’ll do better.
But Orman’s approach definitely makes more sense financially for most people. If you can find other ways to stay on track, the deployment method may prove to be the best option for you.
Alert: The highest cash back card we’ve seen now has 0% introductory APR through 2023
If you use the wrong credit or debit card, it could cost you dearly. Our expert likes this first choicewhich includes a 0% introductory APR until 2023, an insane reimbursement rate of up to 5%, and all without annual fees.
In fact, this map is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.
We are firm believers in the Golden Rule, which is why editorial opinions are our own and have not been previously reviewed, approved or endorsed by the advertisers included. The Ascent does not cover all offers on the market. The editorial content of The Ascent is separate from the editorial content of The Motley Fool and is created by a different team of analysts. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.