Eliminating your debt is an ambitious goal that requires planning and sacrifice in order to achieve. Though it isn’t always easy, living debt free can take a lot of stress off of your shoulders and free up money for financial goals you may not be able to reach right now. So what are some strategies for getting rid of debt fast?
Always Make More Than The Minimum Payment
Making the minimum payment on your credit card debt is not an effective debt reduction strategy. Often times the minimum payment barely covers the interest that has accrued to the debt, and paying it off will not reduce the your principle balance by any appreciable amount – if at all. Lucky for those who seek to eliminate debt, MSN Money Central reports that many credit card companies are increasing their minimum payments to help consumers get out of debt faster.
Still, the longer your balance is owed, the more interest it gains. Thus, if you want to reduce your debt fast, you should consider making triple or more the minimum payment to ensure that the actual debt that you owe is being reduced, and not just the interest.
Prioritize Debt Reduction Above All Pleasure Spending
In order to succeed at reducing or eliminating your debt, you must prioritize this goal over all other pleasure expenses. A good strategy is to get rid of your current card so that you not tempted to spend more, and then begin systematically cutting expenses in other areas of your life.
MSN offers many tips on how to free up a large percentage of your income and put the savings toward aggressively reducing your debt. Packing your own lunch for work and brewing your own coffee in the morning can save you around $30 – $50/week. This alone could produce an extra $200.00 each month that should straight to debt reduction. Think about common expenses and try to come up with ways to eliminate or reduce them, always putting the savings toward your debt.
Lower Your Interest Rate
If you are prepared to start making big payments against your credit card debt, it is important to make sure you have a low interest rate. A high interest rate only increases the amount of your payment that goes to the credit card company and not toward the reduction of your debt. If you have been making reliable payments, consider phoning the credit company and asking them to lower your rate.
If this does not work, look into obtaining a low-interest peer to peer loan for the amount of your credit card debt. You can use this loan to pay off your cards, and then pay down the loan at a lower rate. Alternatively, you could also apply for a new low-interest credit card and transfer your balance from your current card onto it. Be sure to check out balance transfer fees on your current card before you do this however, as high penalties can sometimes negate the benefits of this strategy.
- Always pay more than the minimum payment.
- Stop spending on your current cards.
- Prioritize debt reduction above pleasure spending.
- Cut your expenses and apply the savings toward your debt.
- Consider using your tax return to pay down debt.