The Best Ways to Pay Off Debt Faster

Different financial experts have different ideas about getting out of debt, though they all agree you must first stop spending beyond your means. According to Ron Lieber, who writes a money blog for the New York Times, people should automate their payments to avoid late fees and penalties for overdue credit card, student loan and other bills. Because individuals have unique financial situations, what works for one person may not be ideal for someone else. There are many schools of thought about the best way to pay off debt faster.

Set a Budget

When you are in debt, you need to be fully aware of how and where you spend your money. Financial expert Jean Chatzky says your first step to being debt free is to calculate all of your spending over a month's time so you can evaluate your expenses and cut back wherever you can. Learn to differentiate between needs and wants, and you can use money formerly spent on (unessential) wants toward paying off your debt. This will move you toward your debt-free goal.

The Debt Snowball

Personal finance guru Dave Ramsey says the satisfaction of eliminating smaller debts first will help keep you moving forward and working toward your debt-free goal. He advocates building momentum with what he calls a "debt snowball." For example, Ramsey advocates you make only the minimum payments on your credit cards, build an emergency fund (he recommends $1,000 to start) so you can keep yourself from accumulating new debt, and then begin tackling your credit card debt in ascending order, lowest interest rate to highest rate. By focusing on one debt at a time, you eliminate individual obligations and can use that money toward your next targeted debt. This approach works with all debts, including student loan payments, car payments and mortgage payments--as long as you remember to make the minimum monthly payments on all of your outstanding bills.

Negotiate

Your first option is to call your credit card companies and see if you can get your fixed rates lowered, or move a balance from one card to another annual percentage rate. By lowering your monthly payment, you can continue to pay the amount your budget allows but knock down the debt faster. If you have a mortgage and/or car payment, look into refinancing at a lower interest rate. The same goes for any personal bank loans you may carry. Finally, if you have medical debt, it's worth your time to call the business office and see if you can negotiate a lower payment.