debtopedia header

Debt Elimination Strategies - 3 Ways To Pay Off Your Debt Faster

Today's society is all about instant gratification. Fast food, quick oil changes, instant access to information - they're all examples of how we want everything right now. And one of worst forms of this is credit card debt. Too many people simply buy everything they want, whether they can afford it or not, because spending is so easy when you just slap down the plastic to pay.

Unfortunately, this will catch up with you eventually and you'll be faced with a great deal of debt that continues to increase because of the high interest rates. At this point, some type of debt elimination strategy will need to be implemented if you ever want to get out from under it.

The following 3 debt management strategies can help you to lower your debt quicker, and pay less interest in the process.

Debt Consolidation

Debt consolidation is the process of getting a single loan for the total amount of outstanding credit card debt and then using that money to pay off the cards. This gives you a single payment to make every month, generally at a considerably lower interest rate.

There are several places to get a consolidation loan. Your bank is one option - if you have a good history with them and have the necessary security you will usually get a good interest rate from them.

There are also many consolidation companies that specialize in these types of loans. Their services vary, and some cater to people with lower credit ratings than others. Because there are so many to choose from, you need to be sure you do your due diligence before deciding on one of these companies.

Research them on the internet and call them and speak to their customer service people. Make sure they are able to answer all your questions effectively and you are comfortable talking to them. If they don't impress you before you sign up, don't expect anything different afterwards.

Credit Card Consolidation

This is similar to the first option, but rather than getting a loan to repay your credit cards you get a lower-interest card and transfer all your other balances to the one.

The credit card business is highly competitive and credit card companies often offer special rates. By transferring your balances to a lower rate card, you can again make a single payment every month plus save money on the interest.

When choosing one of these cards, make sure you read the fine print. The special rate is sometimes an "introductory" rate which will only last for a few weeks or months. After that the rate may be the same or even higher than the cards you're paying off.

Also, make sure that balance transfers qualify for the special rate. In some cases, the rate is only available for purchases, not transfers.

The Snowball Method

The "Snowball" method involves the following steps:

  1. Make a list of all your credit cards, their balances and their interest rates
  2. Determine how much extra you can pay after you make all the minimum monthly payments
  3. Put that extra money towards paying off the card with the lowest balance
  4. When that card is paid off, add that payment to the next lowest balance card and follow the same process
  5. Continue paying off each card in turn until they are all paid

Some people prefer to start with the card with the highest interest rate. It doesn't really matter which way you choose to start, but by paying off the lower balance cards first you'll see faster progress which can be inspiring.



Credit Card Debt | Site Map