According to statistics from the Federal Reserve, as of 2010 the average person in the United States had about $7,800 in consumer debt. With so much debt, many people struggle just to make ends meet, let alone eliminate their account balances. If you are interested in paying off your debt and taking control of your financial situation, a number of options are available.
Create a Snowball of Debt
The debt snowball method is a strategy that involves creating momentum as you pay off your debt. With the debt snowball, you pay the minimum amount required on every account you have except for the smallest one. On the smallest account, you pay as much is you possibly can every month. This pays off the smallest account relatively quickly. Then you apply any money that you were paying for that account to the next smallest account and so on. This makes your debt payment grow each month and helps you stay motivated to pay off your debt.
Focus on Interest Rates
Another strategy that you can use involves paying off the debt with the highest interest rate first. For example, if you have three credit cards, one with an interest rate of 19 percent, one with a rate of 15 percent and one with a rate of 10 percent, you put all the extra money you have on the 19 percent account. By doing this, you eliminate the high interest debt first which saves you money during the process. You can then put more of your money toward paying off debt instead of paying interest.
Debt Settlement
One way that you can pay off your debt quickly is to settle with your creditors. Debt settlement is an option that allows you to negotiate new terms with your creditors. You provide a one-time, lump-sum payment to a creditor and the creditor cuts your balance substantially. When you use this option, you can save a large amount of money on your debt. But it also hurts your credit score as you do not pay the debt back according to the terms of the loan or account.
Use Savings
Another way that you could potentially pay off your debt is to use your savings. If you have money in a savings account, you can tap into it and use it to eliminate your debt. This can be risky because it reduces the amount of money that you have available during an emergency. Some people in this situation even tap into a retirement account to pay off their debt. While this is possible, it may not be the best approach because it can set you far behind on your retirement savings.
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