The Right Way to Pay Off Debt

Credit cards and loans provide a way to purchase an item or a service immediately and pay off the balance over a period of time. In the case of two or more credit cards or loans, the debt load can begin to pile up for the user of these financial instruments. Proper debt management can benefit a credit user, reducing the length of time that debts drag down his personal finances.

Instructions

1

Evaluate all credit card and loan statements and pay attention to the size of the remaining balance on each account. Organize the balances on a piece of paper, listing the account with the smallest balance as Item 1. List each additional account balance moving down the list, from the lowest balance to the highest balance.

2

Pay double the minimum payment required each month on the account with the lowest balance, while making the minimum payments on all other accounts. Continue until the account with the lowest balance has been paid off.

3

Apply the amount of money which was being spent toward paying off the smallest account to the next-higher account balance. If the minimum payment was $20 a month, and another $20 to double it, apply the full $40 a month to the next-higher account balance along with the minimum for that account. This will be nearly a triple payment on that account. Continue until the second account has been paid off.

4

Use all of the monthly funds you would have spent on the first accounts to pay off the third-highest balance, along with its normal minimum. Do the same for all additional accounts until paid in full. By applying the payment funds being used for previous cards toward the next larger debts sequentially, debts can be paid off in a systematic way.