Pay Off One Debt At A Time
You can increase your payments on each debt and that would get the job done, but it demoralizing. Seeing balances slowly go down is very bad for your morale.
Instead, pay the minimums on all of your accounts except one. Pick one account and pay as much as you possibly can on it. The balance on that one account will drop quickly and it will encourage you to keep paying down your debt since you can more tangibly see real results.
As far as which debt to pay down first, you have two choices. The first choice is to pay the debt with the highest interest. This is the most logical choice because you will save the most money by reducing the highest interest debt.
Your second choice is to pay on the smallest debt first. This is called “debt snowballing”. The principal is that you pay the smallest first and then move on to bigger and bigger ones. Because you focus on small accounts first, you will see them paid off quickly. This is encouraging and will keep you motivated. Motivation is key when you are paying off debt, especially when you are making other financial sacrifices.
Get A Personal Loan
Consolidating your debt into a personal loan will not get it paid off but it can reduce the interest that you are paying. Get a free personal loan quote and see what kind of interest rate you qualify for. Reducing your interest rate from 17% to 8 percent can cut the interest you pay by more than half.
After you consolidate your loans into a personal loan, you can then begin paying extra payments and make more progress because of this reduction in interest.
Commit Windfalls To Debt
Decide right now to commit every windfall to your debt. This means things like tax refunds, bonuses from work and even birthday money.
Get away from the idea that because it is essentially found money that you do not need to be responsible with it. Let’s face it, it is this sort of thinking that probably got you into debt.
You do not need the money to pay your monthly expenses, so just put it directly onto your debt.
Chart Your Progress
For some of us, a visual is useful to stay motivated. Motivation is key to debt reduction. Use an online charting tool to come up with some cool graphics showing where your debt is, what you have paid off and where you are going to be soon. You can look at them when you are thinking about deviating from your plan.
Get Professional Help
In some cases, it might be best to ask for help from a professional. This is not to say that you should use one of those debt relief companies. Instead look for free or cheap local services that can give you the advice that you need to stay on the right track.
These services can help you out with a plan, offer you more options and help you deal with unfair or illegal debt collection practices. If you are in the military, you have additional services available to you and a counselor can help you find them.
Slash Your Budget
Hopefully, you have a budget. If not, sit down now and write one out with every expense that you pay in a month. Also, be sure to include those semi-annual payments that you might make to an HOA or other provider.
Next, slash every non necessity item. Cut off the cable and get an antenna, cut your entertainment budget down to next to nothing and in general do everything you can to allow you to allocate more money to your debt.
This is a desperate thing to do and it might make you a bit miserable at times but it will pay huge dividends in the end when you find yourself free of debt.
Do A Balance Transfer
If your credit is still good but you are carrying debt at high interest, consider a balance transfer. Look for credit cards offering heavily lowered or interest free introductory periods and apply. Then transfer your balances over and enjoy the reduced interest.
It can save you hundreds of dollars in interest as long as you do not charge the paid off cards again.
When the introductory rate is over, if you still have debt, just repeat the process again.
File For Bankruptcy
Sometimes this could be the answer. If you are desperate for money and it is just not there to pay off your debt, bankruptcy can give you the fresh start you need.
When it comes to bankruptcy as an individual, you have two choices. You can file chapter 7 or chapter 13. With chapter 7, all dischargeable debt is wiped clean. With chapter 13, you agree to a payment plan to pay back all or a portion of your debt.
To qualify for chapter 7, you need to either be under a set income level or pass the means test. The means test looks at all of your necessary expenses to see if you qualify. For example, you could make a bit over the minimum income level but have daycare expenses totaling $1000 a month. This could qualify you for chapter 7.
The above information is, of course, a huge oversimplification of the bankruptcy process. You should consult with a bankruptcy attorney in your area for advice. Most offer a free consultation.
Debt is a problem that most of us will face at some point. Some choose to live with the debt, never truly getting caught up. Others will face the problem head on and build a much brighter financial future. Which one will you be.