How to Pay off Debt Using the Power of Amortization

Amortization is the term used to indicate the end of a debt or the process to reach the end of a debt, typically through regularly scheduled payments of principal and interest. Like the word mortgage, its root comes from the French word "mort," meaning "death." Most people welcome the death of debts and mortgages, and you can speed up the process of eliminating them in a number of fairly painless ways. The longer you take to pay off your debts, the more interest you pay on them and the more they cost you.

Instructions

1

Make as large a down payment as possible when you first take on a mortgage. The more you pay up front, the less you owe and the more quickly you are able to reach the point of amortization for your mortgage.

2

Refinance debts and mortgages if interest rates and conditions become advantageous to you. Most fixed rate mortgages have designated renewal periods. If interest rates are lower at the time for renewal than they were when you first took out the mortgage, refinance your debt and pay less interest on it. Consult with your banker about options for reducing the interest rates on any debts you have.

3

Apply the money that was going to one debt to the next debt as soon as you amortize the first one. By doing this, you can budget a consistent amount of money for paying off debts over time. The rate at which debts are amortized increases as you apply the same amount of money to fewer and fewer debts.

4

Shorten the date of your mortgage amortization by making payments every two weeks rather than monthly. This simple act reduces the amount of interest you pay, because you pay additional principal every year.

5

Prepay as much as possible on mortgages and other debts with set payment schedules. While scheduled payments are applied to both principal and interest, 100 percent of a prepayment is applied directly to the principal of a debt. Making a prepayment at the beginning of every year can substantially shorten the length of a debt or mortgage and accelerate amortization.