Paying down your debt may seem like a goal that is many years down the road – and perhaps accomplishing it will take years – but you will get your debt paid down completely a lot faster if you devise a plan to do so right now. Paying your debt will free income to be used for vacations, home improvements, retirement savings or savings for college. The sooner you remove your debt from your monthly budget the sooner you can start directing your income to the projects you ‘s rather fund.
Paying your debt can be done the long way or the swift way. Paying your debt faster does not always mean paying more per month. Many times, paying your debt faster requires paying smarter, not more per month.
First and foremost in your planning should be getting a clear picture of your finances and debt situation. Only after you have a sober look at what you owe can you devise a plan to best eliminate your debt. Your examination of your debt should include finding out how many sources of debt you have, how much you owe each source of debt, the interest or finance charges associated with each creditor, and the minimum payments allowed for each source of debt.
You may have learned that paying the minimum payment is not the most efficient way to paying down your debt. That is exactly correct. Paying the minimum payment can mean paying for decades before a modest debt is paid in full. You need to find the minimum payment amount so that you can have a clear understanding of the least you have to do to avoid fees while you concentrate your efforts to satisfying more costly debt.
Your strategy should be to pay the debt that costs you the most, first. Credit cards and other debt that has a high interest rate should be targeted first to rid yourself of the high finance charge as soon as possible. Pay only the minimum required payments to the lower interest carrying accounts or creditors and devote your maximum effort toward the higher rated account(s). Once the account with the highest interest rate is paid off, focus on the next highest rated account while paying the minimum payment to the remaining accounts. Continue this process until you are debt-free.
The key to paying your debt quickly is minimizing the amount of interest you are paying on the debt you’ve accumulated. Consolidating your debt will bring all of your debt under one interest rate and allow you to make one payment that is applied evenly to all of what you owe.
There are several ways to go about consolidating your debt. If you have a credit card that has the available balance sufficient to subsume all of your other debt, or a card that can have the credit line raised to absorb the balance of your debt; consider using the card if and only if it is or can be lowered to the lowest rate of all of your debt. If you can have the interest rate lowered to a rate lower than all but one of your debt accounts; use the card for all of your debt except the one account with a rate lower than the credit card. Then, pay the minimum payment to that lowest rated account and devote the bulk of your payment power toward paying off the credit card.