5 Steps to Get Out of Debt Faster
Regardless of your heavy debts, get rid of it now. According to WebMD, living with debt isn’t just a headache. It’s actually harmful to your health and can lead to stress-related illnesses such as heart disease, high blood pressure, diabetes, and cancers.
In addition to health problems, debt can also harm your relationships. According to the University of Virginia National Marriage Plan, over time, heavily indebted newlyweds will feel happier than couples with no or almost no debt.
Then there’s the obvious fact: Debt can ruin your credit, make it harder to qualify for financing like home loans and keep you from saving for retirement, college, and other life goals.
Debt can affect your health, heart, and wallet, but it doesn’t have to be. Follow these five steps to get out of debt faster and pay less hard-earned money:
1. Make your debt list.
First, get a copy of your free credit report to calculate your debt formally. List each debt in order from highest interest rate to the lowest interest rate. Your credit report does not contain interest information, so you should find this information in previous statements or online account information. You must also include the outstanding balance of each debt and the minimum monthly payment.
2. Determine how much “extra” you can pay.
If you only pay off the minimum debt, you still have a long way to go. Consider this: According to CreditCards.com, U.S. households’ average credit card debt with such debt is $ 15,519. If you only pay the minimum monthly amount for this debt, it will take more than 36 years for your balance to be fully paid off. During this time, you should have paid more than $ 21,000 in interest.
That’s why it’s important to dig into your wallet and use excess money to pay off debt. Whether it’s an additional $ 50 or $ 200 monthly payment, it will help you get rid of debt faster. Take a look at your budget planner to see how much “extra” expenses you can afford. If there’s nothing left at the end of the month, consider trying some money-saving strategies to increase your monthly surplus.
3. Focus on debt with the highest interest.
Start by focusing your extra money and energy on debt with the highest interest. To do this, you need to apply your extra money plus the minimum monthly payment to this debt every month. While you may only focus on one debt at a time, make sure you pay at least the minimum payment required for the rest of the debt each month.
4. Transfer the money to the next debt.
After paying off the debt with the highest interest, shift your focus to the debt with the next highest interest. The key is, not only do you have to pay the minimum monthly payment for this debt, but you also have to use the minimum monthly payment for the debt you just paid off plus the additional funds discovered. If you’ve found a way to make all of these payments before, you can instantly find a way to make those payments.
Applying this amount to debt can help you pay off the debt more quickly. For any debt that follows, the repayment process will only speed up. This payment method is similar to “Debt Snowball” by financial author Dave Ramsey. Still, instead of focusing on the debt with the lowest balance, you focus on the debt with the highest interest, saving more long-term interest—the condition.
5. Repeat this until you are out of debt.
Keep going down the list. When splitting each debt and transferring to the next debt, keep in mind that you are saving interest for yourself and that you will soon be able to enjoy a debt-free life. Take it from me, it’s been debt-free for over two years, and it’s worth it.
