The Right Way to Pay off Debt

Accumulating debt can really sneak up on you. Credit cards often offer low monthly payments and high rates of interest that when combined with high balances can become a real financial nightmare. Once you recognize you have too much debt, there are a number of ways to address the problem and repair the damage.

The long term strategy is to control spending and gradually pay off debt, while changing spending habits.An effective short cut, is through a debt consolidation loan. While a debt consolidation loan does not make the debt immediately go away, it can provide immediate relief with improved cash flow. That’s because this strategy will provide a lower rate of interest, lower payments and a faster payoff.


Debt Consolidation Loan. If your debt is overwhelming and you are unable to budget your way out of debt, then a consolidation loan might be the answer. This solution allows you to convert high interest credit card debt into lower interest payments that will pay the debt off faster. The biggest advantage to a consolidation loan is that it offers immediate relief for an overwhelming problem. It can reduce monthly costs so you are living within your means and making progress with paying off debt.


These strategies can be incorporated into your planning whether or not you use a debt consolidation loan.

Create a budget. The first step in managing debt is to create a monthly budget.

Determine how much income you have and what your expenses are. If expenses are higher than your income, it is important to cut back so you are not incurring new debt each month. Once you have created a budget, stick to it.Pay off the most expensive debt first. When setting up a payoff plan, list all of your debts, the interest rate, balances and minimum monthly payments. Typically you will either start with the highest interest rate or the lowest account balance. Make minimum payments on all of the other debt. Once a bill is paid off, add that monthly payment to the next card’s minimum payment to reduce one debt payment at a time.Stop using your credit cards. When you review the budget make sure to limit spending to the income you are receiving. If you have more expenses than income, it may be necessary to take a second job so your income will cover all of your expenses. You cannot be successful at paying off your debt if you are adding to the balances every month. Use cash or debit cards only during this period of time.
Put extra cash towards paying down debt. If you receive a windfall, use this money to pay down your credit cards instead of increasing spending. Windfalls can come from bonuses, commission checks, tax refunds, or other similar sources. When this influx of cash occurs this is a perfect time

to pay off or pay down the highest interest rate credit card.Sell household items you no longer use. We are a society that accumulates large amounts of stuff. Take the time to really weed through your belongings. Do you have sports equipment for sports your children no longer play, equipment for hobbies you no longer participate in or things you have outgrown? Selling these items will bring in extra cash that can be put towards paying down debt.Change your spending habits. You got into this mess because your spending habits were not as good as they could be. Taking the time to reflect on why you spend money will help you access and change spending habits. If you do not make changes, paying down debt will become a temporary solution, as these same habits could send you back into high levels of debt.
When it comes to paying off debt, patience is required. You did not accumulate $40,000 or more in debt overnight and it will not go away overnight either. With some diligence and self-control, you can get your debt under control and paid off. If you will take the lessons learned from overspending to heart, you can learn how to live debt free and enjoy the freedom that provides.