Paying off debt can seem like a monumental task that may never be complete. However, getting out of debt is possible with a little bit of discipline and financial skill. By spending less money than you make and following the five steps outlined in the Equifax Finance Blog’s recent article, “
Ask Ilyce: What Are the Best Ways to Pay Down Debt?,” you can begin to lower your debt.
The first step to paying down your debt is to write all of it down, along with the interest rates. This can include credit card debt, car loans, student loans and more. Make sure that the information you’ve written down matches what is reported on your credit report.
Set up a payment plan by putting the most money toward the debt with the highest interest rate first. A loan with a higher interest rate means that you’ll pay more over the life of the loan. Typically, student loans have lower interest rates than credit cards or personal loans. Be sure you know the interest rates you’re paying for all of your debt to determine which one you should select to pay off first. Once you’ve figured out which debt you’ll focus on first, pay as much as you can toward that debt while still making the minimum payments on all of your other forms of debt.
Another option that may increase how fast you’re able to pay down your debt is asking for a lower interest rate. If you have consistently made your payments or have exhibited exemplary behavior, your creditor may be willing to lower your rate.
To help determine where you can cut back, monitor your spending habits for two to three months. Whether you choose to do it yourself or use a website such as Mint to determine where your money goes, this will quickly highlight areas you may spend unnecessary dollars. Once you’ve determined where you can cut back, you’ll have that additional money to put toward your debt.
Finally, put all of your additional income toward your debt. If you receive birthday money from a relative or get an end-of-year bonus at work, put this unexpected income to good use by paying down your debt.
By combining all of these steps, you will quickly begin to see progress as you pay down your debt. For more information on how to manage your debt, be sure to visit the Equifax Finance Blog.