If being debt-free is one of your New Year’s resolutions, you’re probably itching to figure out how to get rid of your debt ASAP. There isn’t a magic bullet, unless you hit the lottery or come into money some other way, but there are things you can do to speed things up.
Figure Out Your New Minimum Payment(s)
If you only pay the minimum the bank recommends, it’s going to take you a long time, probably many years, to pay off your debt. The minimum payment is mostly interest, so you’re not doing a lot to the overall balance. But instead of just throwing money at the problem, build a strategy.
If you have multiple credit cards or other debts, you might want to try “snowballing” your debt repayment. Here’s how it works:
- Figure out what all the minimum payments are for all your debts. You’ll need to pay at least this amount every month.
- Create a budget and determine how much extra you have to contribute to your debt repayment plan.
- Put the extra debt repayment money toward the debt with the highest interest rate, paying the minimum on the others.
- Once you pay off the high-interest debt, apply the same method to the debt with the next highest interest.
This method doesn’t work for everyone, but it’s a sure-fire way to pay off debt faster.
Transfer to a Low-Interest Card
If you’re carrying credit cards with high interest rate, a good chunk of your payments are going to interest. You can combat this by shopping around for cards with better rates, then simply transfer balances over. Some financial institutions offer specials where you don’t pay any interest for a certain time period. Learn about Aspire’s here.
Make Bi-Weekly Payments on Installment Loans
For car loans, mortgages, and personal loans, split your monthly payment into bi-weekly payments. This will set it up so you’re making one extra payment per year, which will speed up your pay-off time as well as shave a lot of interest off. Just be sure you don’t have any pre-payment penalties.
Don’t Forget to Reward Yourself
If you pay off one debt or reach a milestone, don’t forget to reward yourself. It doesn’t have to be going out and buying something, it can be something simple. You want to stay motivated to keep on track, and rewards can help with that.
For help figuring out your repayment plan, click here to use an extra payment calculator.