What is Debt Stacking and How to Apply it? – In the financial world, there are many methods that can be used as part of a strategy to pay off debt. One of them is probably the most popular is debt stacking.
Debt stacking is often considered the most reasonable and most appropriate strategy for paying off debt, although there are other methods and depend on their application.
Through this article, let’s discuss further what is debt stacking and how to effectively implement it to be free from debt bondage.
What is Debt Stacking?
Debt stacking or also known as the debt avalanche method is a method of paying off debts that ranks priorities according to the interest in paying off the debt with the highest interest rate to the lowest.
The debt stacking method advises you to sort debt by interest, from highest to lowest.
Say you have debt in three different sources, then all you need to do is sort the three debts according to the amount of interest, from highest to lowest, then prioritize paying off the debt in its order.
If you do not use the particular strategy and do not determine which priority to immediately be paid off, then debt with high interest can further strangle and disrupt your finances to pay off other debts.
Conversely, if you immediately pay off the debt with the highest interest, you can then focus on paying off the debt with the next highest interest rate, and so on until all your debts are paid off.
Case Example: How Does the Debt Stacking Method Work?
Let’s say someone named Yoga has debts in several sources with the following details:
- Debt A is $ 50,000,000, the minimum repayments are $ 2,000,000 per month with 3% interest per month, the remaining debt is $ 44,000,000.
- Debt B of $ 30,000,000, minimum repayments of $ 1,700,000 per month with 4% interest per month, remaining debt of $ 26,000,000.
- Debt C is $ 70,000,000, a minimum repayment of $ 6,700,000 per month with an interest of 2.7% per month, the remaining debt is $ 34,000,000.
- Debt D is $ 16,000,000, the minimum repayment is $ 550,000 per month with 4.2% interest per month, the remaining debt is $ 7,000,000.
Implement a Debt Stacking Strategy to Pay Off Loans
If you apply for a loan at Linkworks whether it’s for business, education, or health, you can also use the debt stacking method so that your loan payments are always on time and increase investor confidence in your credit.
Because loans in Linkworks have the lowest interest rates compared to other debts, you can use a debt stacking strategy so that all installments can be paid every month, including loan installments on Linkworks while increasing investor confidence in the confidence of your business potential.
This strategy is also useful so that your other payments are not disrupted, so that your finances can continue to be stable until all your debts can be paid off properly. What do you think?
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