Do-It-Yourself: Get Rid of Debt

Debt creates a problem for many consumers because too much of it leads to poor credit. If you have a good to excellent credit rating, you qualify for the most competitive interest rates and loan terms. Create a strategy to rid yourself of debt and build your credit rating over time.

Planning Debt Payoff

The amount of time it takes you to rid yourself of debt depends on how much you owe and the amount you can afford to repay each month. Debt calculators are available online to help you determine, based on your interest rate, how long it will take you to pay off each of your debts at a certain monthly payment amount. The more you pay, the less time it will take you to get rid of the loan.

Tight the Belt

To free up extra cash to apply toward your debt, you may have to cut back on certain expenses until your debts are paid in full. No matter what debt you are repaying, making partial payments means accumulating more debt each month. The primary reason for this is interest. Interest payments are applied to each billing cycle your balance is not paid in full. Use coupons, compare prices, shop for items on sale and eliminate costly leisure activities until you can afford to repay your debt in full.

Divide and Conquer

Analyze your debts before making a commitment to how much you want to pay on each card. Divide the high interest rate cards from the low interest rate cards and make the largest payments on cards with high interest first. The sooner credit cards and loans with high interest are repaid, the more cash you have to make payments toward your low-interest debt. If all your cards have high interest rates, prioritize the debts according to the amount owed from highest to lowest.

Avoid the Minimum

Making the minimum payment on your debt means you pay back the debt multiple times before it is paid in full. On large debts, this can mean paying back a debt for years instead of months. CNN Money notes that minimum payments barely covers the interest owed on a debt, which means payment on your debt is simply a formality to keep you in compliance with your loan agreement. Ignore the suggested minimum and pay according to your goals to become debt-free.