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Steps to Eliminating Debt!
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Debt is so easy to get into. We all buy things on credit, take loans out to
get instant money or pay for goods on credit cards. Credit can take minutes to
build up, but years to pay off. When debt builds up we end up paying regular
monthly payments that simply increase every time we get more credit.
The first thing we all have to do to clear debt is STOP getting into any more
debt!
If you never took out another loan and cut up your credit cards then
after a while you will pay off all your debt (provided you are making regular
monthly payments).
However, there are lots of ways to pay off debt quicker and help you to become
debt free. Make a list of all the debt you have. This is everything that you
pay to a creditor and includes any loans, credit cards, financed items such as
the finance on your car or furniture and also the big one, your mortgage.
Take the Quiz! Do You Know:
1. How much do you owe and pay to each of your creditors?
2. How of this debt is interest that you are being charged?
3. How much disposible income do you have after taxes?
4. How much of your money is left after taxes and living expenses to pay off debt?
5. What is your smallest debt, then your next smallest?
Once you have all these numbers worked out, you are in a good position to
start working out the fastest and cheapest way to clear this debt.
Paying off the debt as quickly as possible:
There are several ways you can pay off debt quickly. Some will be better than
others and it also depends on the type of debt you have.
The interest pay off
If you have a credit card or mortgage then you paying, often large amounts of,
interest monthly on the amount of debt you have left to pay of. If you pay off larger
amounts each month on a loan or credit account, the more of your payments get
applied to the principal, and the interest you have to pay on the debt goes down
significantly.
Try an interest calculator if you doubt this. Take the credit card or loan
with the highest interest rate and pay this debt of faster. Once the
highest-interest debt is
paid off, move to the next debt with high interest rates. Be careful about
clearing debt only to use it again. Pay off, move on.
Fight any efforts to charge prepayment penalties. If your debt contract or
credit account does not specifically provide for prepayment penalty, don't pay
any. Dispute this charge until you get some action.
The minimum debt pay off
Take a look at all your loans and credit accounts and pick the smallest one.
Paying off this small debt by paying a little extra each month to get rid of
at least one complete debt fast will go a long way toward bolstering your
motivation and determination to continue on your path to debt freedom. Once you pay
off this small debt or account, pat yourself on the back and immediately take
the amount you were paying on this small loan or account and immediately use it towards paying off the next
smallest loan. Eventually you will again end up with only your mortgage left,
if you have one, and you will be able to use the money you were expended for a
raft of small loans to pay off this bigger debt much faster.
The biggest payment pay off – Targeting number 3 (or 4) on the list above
This works best for small loans with fixed payments and is great for people
who find themselves with lots of loans with money to pay off on all of them.
Because you want to reduce the amount of time and money you have to use to pay
off the loan you simply target the largest payment you have to make every
month. This may be the loan with the highest interest or the one the one with
the highest balance. Once you put everything you can into paying this off your
monthly payments will suddenly drop.
You can also do this by targeting the loan that has the least number of months
left to pay off the debt. This will reduce the monthly payments quicker.
This will leave you with a lot more money every month and helps to control
your finances better especially for people that struggle to pay off their
loans. Clearing the loan that takes the highest payment every month has the
biggest effect on your bank balance every month. Clearing the loan that has
the least number of monthly payments left has the fastest effect on your
monthly bank balance.
The smart part is that once you have paid off a debt or loan, use the money
you have freed up to pay the other loans off faster! Time is money, and that
axiom works for debtors as well as creditors!
You CAN take control of your bills, and your life. Start
Now.
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