There are a number of ways to get out of debt, including getting professional help from a reputable credit counseling non-profit. Remember - you didn’t get into debt overnight and you won’t get out of debt quickly. You need to develop and follow a plan. There are a some additional options in our tips below. Here is one way:
- List all of your debt balances, interest rates, and minimum payments from the highest interest rate to lowest
- Pay extra on the highest rate loan and the minimum payment on the others
- When one loan is paid off, put the payment for that loan to the next highest loan, and so on, until all debt is paid
This, of course, only works if you do not add new debt.
A balanced budget and careful tracking will help during this process. Be prepared to make tough choices about spending, or reduced spending, during this time.
Tips & Resources - Managing Debt
- “Round up” your payments – You can pay off your bills, or build up your home equity faster by simply rounding your payments to the nearest hundred, or send an extra $50 or $100 each month.
- Consolidate all your credit cards onto one or two cards with the lowest interest rates. Pay off as much as you can each month.
- Keep “paying off” a loan. Once you have paid off your loans, make the payment to yourself. For example, when you finish paying off your car loan, continue to make the same monthly payment to yourself. When the time comes to buy a new car, you may find you have enough to pay for the car with cash.