Most people wouldn’t think of getting out of debt as a way to earn income but paying off your debts is like putting money in your pocket. Instead of paying creditors interest, you are keeping the savings.
This is on of the great ways on how to make passive income. You can then turn around and use that money to earn interest in a high-yield savings account.
Begin by paying off your highest-interest debts first. For instance, if you owe $10,000 on a credit card that charges 20 percent interest, you would ultimately pay $2,000 in interest. If you owe $10,000 on a different credit card that charges 12 percent interest, your yearly cost could be $1,200. By paying off the first credit card, you would in a sense, be earning $800 more the first year than if you paid off the second credit card. Of course, the amount of interest you save will change as you pay off the debt.
If earnings are low, it’s better to pay off your debts than invest your money in saving accounts. By saving the money instead of paying the debt, you lose money. An example of this would be if your debt of $10,000 costs 12 percent in interest and you have $10,000 in savings earning 1.5 percent interest, then you are really losing $1,050.
That is the difference between the interest amounts. Once you are out of debt, check into investing the money you normally would have budgeted to pay off your debts.