Developing a debt payoff strategy can quickly reduce your consumer debt and fix your finances. Debt accumulates because of reasons such as overspending or cash flow issues. But just because you have a lot of debt doesn't mean you're stuck with these balances forever. Consider strategies to help payoff your debt fast.
Know Your Totals
Start your debt payoff strategy by first calculating the amount you owe on credit cards and other loans. Knowing your balance provides indication of how long it will take to reduce or payoff these balances altogether. On a sheet of paper, write down the names of your present creditors and your current balances. Also, take note of the interest rate that you're paying on each account.
Review Personal Budget
Next, determine if you have disposable income each month, and if so, how much disposable income. Debt payoff strategies typically involve making higher payments to your creditors, which involves putting your extra income toward debt elimination. Subtract recurring monthly expenses such as housing, minimum debt payments and other household expenses from your monthly take-home pay.
Use Extra Income Wisely
Rather than spend your extra money on non-essentials such as clothing, jewelry, entertainment or recreation, resolve to payoff your debt with this money. Let's say you have an extra $150 a month after paying your bills. Use this money to payoff a $1,000 credit card balance in approximately 10 months. Increase the payment to $200 a month and payoff the balance in half the time.
Debt and Interest Rates
The interest rate that you're currently paying on your consumer debt determines how fast you're able to payoff the balance. Talk with your creditors and ask for a lower interest rate on your credit cards. Mention your plans to apply for another card and take your business elsewhere. Card companies may offer on-the-spot reductions to keep you as a cardholder with the company.
Home Equity Loan
Clear your credit card debt with one check by means of a home equity loan. Discuss options with a home loan lender. You can apply for a home equity loan and get funds in one lump sum, or take out a home equity line of credit, HELOC, and pull cash from a revolving line of credit on an as-needed basis. These funds use your house's equity as collateral, and you can use money for debt consolidation.
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