Have you ever wished you could pay off your debt faster? Of course you have! The fastest way to reduce what you owe is to pay off your balance each month, but if that's not possible, we have 5 great tips that you can use right away to start demolishing your debt.
Paying More Than The Minimum
It seems so simple, but many people don't realize that this is one of the most powerful ways to fast-track your debt repayment. It works for all kinds of credit, from car and personal loans to mortgages and credit cards. Plus, it can save you a ton of interest. Even paying just a little more each month makes a difference. And, what can be more satisfying than watching your balances go down?
Have you heard of the avalanche method? Like an avalanche, your debt reduction gains momentum as you pay off each account. Here's how it works:
- List all your debts and sort them from highest to lowest interest rate.
- Make all your minimum payments.
- Add any extra money you have available to your payment for the account with the highest interest.
- Once that's paid off, keep making minimum payments on all accounts. For the account with the next highest interest, add the minimum payment amount from the paid-off account, plus any extra money until it's paid off.
Some people prefer seeing small wins when it comes to paying off their debt. The snowball method is similar to the avalanche method. You make all your minimum payments and add some money to one account payment until it's paid off. Then you repeat the process with your other accounts.
The difference is that you start with the account with the lowest balance. You won't save as much money on interest, but smaller balances are easier to pay off faster, and you'll feel great about eliminating one more debt.
It works just the way it sounds. You move your current credit card balance to one that has a lower interest rate. This could be to an existing card or to a new one.
What should you consider when picking a new credit card?
You'll probably find lots of offers for special low introductory rates and no annual fee. What could be better than "low" and "no," right? Before you decide, you'll need to know:
- how long the introductory period lasts
- what the interest rate will be after it ends
- whether there are any balance transfer fees
- whether any new purchases will change your interest rate
How would you like to have just one monthly credit bill instead of multiple due dates, interest rates and payment amounts? That's the beauty of a consolidation loan. You can roll all those high-interest credit cards and loans into one low-rate loan. One loan. One payment.
You'll be less likely to make a mistake or miss a payment.
As if that isn't great enough, a consolidation loan might even lower how much you have to pay out each month, and because the rate is lower, you'll be paying out less interest. Win-win!
This strategy is especially effective if you don't rack up new debt on the loans and credit cards you paid off.
MakingCents Can Help You Rev Up Your Plan
When you're ready to get started, be sure to visit Navy Federal Credit Union's MakingCents Knowledge Center for more ways to rev up your plan to pay off debt. You'll find tools, resources and tips on managing your finances to help you build a secure future.