Ways to Eliminate Debt

By: Dewey Kearney

It can take minutes to build up, but years to eliminate debt. We all buy things on credit or take loans out to get instant money. And the truth is, the credit card companies encourage us to build up debt. Increasing credit balances, encouraging us with special interest rates for balance transfers, then jacking up the interest rates a short time later. Soon we're over our heads wondering how to eliminate our debt.

The most important thing we all have to do to eliminate debt is stop getting into more debt. If you cut up your credit cards and stopped using credit after a while you will eliminate all your debt. Sounds easier than it is, we know. But stop and think. If you set yourself a budget, living on cash only (you did it when you were a teenager, you can do it now), and determined to eliminate your debt as quick as possible, you can do it!

There are lots of clever ways to eliminate debt quicker and help you to become debt free. But before you start 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.

You Should Know:



    1. The total amount of the debt (for instance, how much do you still owe on your car, or what's the total balance on your credit card, not just the minimum payment due)

    2. What you pay every month (and be honest)

    3. How many months you have left to pay (24 car payments, 30 years on your mortgage?)

    4. The interest rate you are being charged (especially on your credit cards)


If you add the amount of debt (number 1 above) you have left on each one of your debts then this is how much you owe to creditors. If you then add up all the monthly payments (number 3 above) this is what you have to pay every month. Once you have worked this out then you are in a good position to start working out the fastest and cheapest way to eliminate your debt.


    ?The Interest Pay Off - Targeting Number Four On The List


To eliminate debt this way simply take the credit card or loan that charges you the highest rate of interest, then pay this off earlier it will save you the most amount of money in the long run. Once it is paid off, move to the next creditor with the biggest interest rate. Take the amount you were paying to the creditor you just paid off and add it to what you pay the next highest creditor. Because mortgages usually have the lowest interest rate out of all credit, and is secured debt you should leave this until last on your list.

It might seem ridiculous that this can eliminate debt but it works better than you think and actually can save you a lot of money in interest!


    ?The Minimum Loan Pay Off - Targeting Number One On The List


Take a look at all your loans and start paying extra on the smallest loan then this will be paid off the fastest. Once you pay this off, take the amount you were paying on that loan and use it towards paying off the next smallest loan. Many people like to use this method to eliminate debt because you can achieve a series of small goals, which encourages you to keep going.

Eventually you will end up with only your mortgage left which - if you take all the money you were paying on your other loans and put it towards your mortgage you can pay off a lot sooner too.


    ?The Biggest Payment Pay Off - Targeting Number 3 On The List


This method of debt elimination works best for small loans with fixed payments or credit cards with low balances (like store credit cards). The goal here is to reduce the amount of time and money to pay off the loan. Simply target the largest payment you have to make every month and put as much extra towards it as you can, while paying the minimum on the other debts. You can also target the loan that has the least number of months left.

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.
Once you have paid off the loan use the money you were giving to that creditor to pay the other loans off faster. Trying to eliminate debt this way is one of the bigger challenges so don't do it unless you already know you can make a plan and stick with it.

Of course, if you have too many credit cards and your budget is already stretched to the max every month you might want to seriously consider a credit counselor to help eliminate debt.

Credit counselors will consolidate all your credit card debt into one monthly payment and work with the creditors to lower your interest rates. You will eliminate your debt in three years and be back on track with your credit.

For more information on credit counseling and to see if it might work for you go to our website: http://www.1-800BadCredit.com

Debt, Loans & Business Cashflow
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