Sometimes, it’s easy to accumulate more debt than you realize. Any of the following situations can lead someone to become over their head in higher-interest credit card debt:
- Accepting multiple credit card offers to receive new rewards and benefits, and then over-leveraging those credit cards.
- Having the opportunity to take a dream vacation or buy a new living room set, but not having the liquid cash to fully cover the purchase. So, the balance may be put on credit cards.
- An unexpected medical emergency occurs, resulting in a bill for several thousand dollars, even with insurance coverage.
- Some people may be living off credit cards for their day-to-day expenses and then they start letting some payments slide. All of a sudden they wake up one day with more debt than they know what to do with.
Then you’re stuck with large monthly payments, possible late fees and past due notices. If you feel like you are in an endless cycle of trying to pay down debt and want to relieve stress in the process, you may want to learn how to pay off debt faster so that you can enjoy life and have more money to accomplish other financial goals. When it comes to paying off debt, faster is a relative term. It’s still going to take some time to get your finances on the right track again, but it can happen more quickly if you take positive steps to get started.
Itemize Your Debt
Before you can be successful at paying off debt faster, you must know what kind of debt you have and how much debt you have1. List all of your debts, including loans and credit cards. List the amounts, the amount of interest you are paying, your APR, and your minimum monthly payments. This information will help you determine which method is best to help you pay off debt as quickly as you can.
Put this information into a spreadsheet or somewhere that you can easily access to update in the future. You can also use a debt consolidation calculator for a fast, at-a-glance look at the total amount you owe across a number of debts. The objective is to get your debt out into the open so you can begin the process of paying it down.
Look at Your Budget
When planning how to pay off debt faster, once you’ve itemized your debt you can now begin to create an accurate budget. Even if you don’t have an established budget, it’s never too late to start. Your budget will tell you what payments towards your debt you can afford. If you find you have extra income in a given month, consider it for where you can increase your payments. As is often the case with debt consolidation, you have to examine where you can cut your expenses. Perhaps you could cut back on your entertainment budget for a few months or make food at home more often instead of eating out. The key is to look at practical ways you could free up money from your budget to put towards your debt.
Put additional income after paying bills towards paying off debt as quickly as you can2, and you may see the impact almost immediately. Begin with the debt that has the highest interest or smallest amount owed. Once each debt is paid off, take the additional payment funds and put towards the next debt.
Apply for a Loan
If you have a large amount of high interest debt, you may want to consider getting a personal loan for debt consolidation. You can use personal loan funds to pay off credit card debt and have just one payment to make each month. An additional benefit with this option is that you end up saving money if your personal loan interest rate is lower than the rates on your other credit balances.
You can find debt consolidation loans online, but take the time to compare rates and terms and make sure that they fit your needs. Once you receive a loan, you should focus on paying it off as quickly as you can.
Getting out of debt faster is possible, and it can happen if you make a plan and follow it. Itemize your debts and look at your overall budget. If you find you have a large amount of higher-interest debt, you may be able to consolidate all your payments and save money on interest with a personal loan. By following these steps, you may be able to get out of debt faster than you once thought possible.