The Best Way to Pay Off a Debt Interest Balance

Debt can easily become overwhelming. High-interest debt, in particular, can become burdensome in a hurry. If you have a loan that is tough to repay or, even worse, is accumulating a higher balance each month, you need to take action. There are several strategies that will ultimately pay off a debt, but the best strategy is the one that repays the debt the fastest, thereby eliminating as much in interest payments as possible.

Instructions

1

Take stock of your situation first. If you do not have a very clear understanding of your financial standing, you will not know how to attack the problem. Add up all of your debts and monthly payments. Add up the amount you have in savings and retirement funds. Lastly, using your bank statements, figure out exactly how much you spend each month in non-essential expenses.

2

Redesign your budget to cut non-essential spending. Make sure you don't cut too drastically, though. If you leave no room in your budget for a small amount of fun, you may end up resenting the plan and ditching it altogether.

3

Liquidate your savings accounts. You probably do not want to liquidate retirement accounts because you will probably face huge early-withdrawal penalties for doing so. However, if you are serious about debt reduction, bite the bullet and use your savings to pay your debt.

4

Pick up a second job. Any extra income can go directly toward debt repayment, assuming your primary work was carrying all of your expenses. Consider working part-time at night if you have a standard nine-to-five job.

5

Use the snowballing technique when you begin actual repayment. This means attacking the debt with every spare penny you have. Using your budget, determine the whole dollar amount (in addition to the minimum payment) you can pay against the bill.

6

Repeat the snowballing technique if you have multiple bills that need to be repaid. Make sure to attack the highest interest debt first and pay minimums on all other accounts.