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Mostly painless ways to pay off debt, any debt, faster


Being debt free is a goal for everyone who has any debt. Yet even though that is a goal for everyone, hardly any has a true plan to be debt free in the near future.  How can you reach debt free status? There are surprisingly several ways to become debt free that don’t have to be that painful.
 
What is the first step in becoming debt free?
The best place to begin is to understand your total amount of debt and break it down by interest rate, balance and monthly payment.  This process will help you understand the bigger picture of what debts to target first.
 
How can this knowledge of debt be utilized?
First, it provides a really good scorecard on which debts are impacting your monthly budget the greatest and also the debts that are more expensive in terms of the amount of interest you are paying each month.  This provides a good starting point for debts to target with extra payments.
 
What is the most important advice for those with high credit card debt?
First and foremost, stop adding to the debt each month. Develop a budget and find a way to stop making purchases with your credit card.  Before you can reduce the debt, you really have to stop adding to the debt.
 
Is there one preferred method for targeting the first debt to focus on?
It really depends upon your situation, some experts will say to focus on the highest interest, others highest payment and yet others the smallest balance. It really depends on your reason.  If you need more cash flow, then the highest payment is smarter.  If your motivation is paying off all debt, then the highest interest rate would be the best choice because you will save on interest paid.
 
Are there other methods for paying debt off faster besides the snowball method?
One method is the rounding up to the next higher 100 dollars.  For example, if your payment is $259, you would always pay $300.  The incremental increase in the payment will accelerate debt pay down and also lowers the interest expense. Another option is to just pay a flat dollar amount above your monthly payment each month.
 
What are methods for paying your mortgage off earlier besides refinancing to a shorter term?
A couple of the more popular methods are the bi-weekly payment plan and the other is making an extra payment one time during the year.  You can make the extra payment option less painful by spreading it out over the entire year by increasing your regular payment by 1/12th of payment.
 
What if you have a lot of high interest rate debt?
Looking into refinancing or consolidating all of the debt into a lower rate loan might be the first step in getting debt free.  With a lower interest rate, more of your payment will go to reducing the principal balance and that in turns lowers the amount of interest you pay. Both of these actions will speed up the repayment of your debt.
 
What are some of the common debt reduction strategies that people don’t take?
The biggest is not using their tax refund or other windfalls of extra money to pay down debt. Often times these are spent on vacations or other purchases and can lead to even more debt because they spend even more than the money they received. 
 


Posted: 9/8/2016 with 0 comments

Categories: Debt Reduction, Loans, Money Matters



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