Debt can become a crippling deadweight around our necks. As debt accumulates, high interest rates can make the debt balloon from something modest into an amount that becomes unmanageable. Paying off debt fast is essential to get back on your feet and to ensure that accumulated interest rates do not multiply your debt levels to many times the original amount. The following are some ways to get out of debt fast, or at least to speed up the process and make sure that your level of debt does not keep going up even as you are trying to pay it down.
Paying off debt fast
You should definitely pay more than the minimum amount owed every month. The less you pay, the more you will owe in interest over the long term. It is in the banks' best interest for you to pay the minimum amount, but it definitely isn't in yours. Try to pay at least double the minimum amount owed every month. Although this may seem like a challenge if you are fighting to make ends meet, you should be able to pull it off with some fiscal discipline. Most of us have some expenses we could do without on a regular basis. For instance, pack your own lunch every day instead of eating out, and stop buying expensive coffee drinks if you're in the habit of doing so. This will free up cash you can use to pay off your debt fast. Over time, you will save hundreds to thousands in interest, and you will be out of your misery much more quickly.
You should also consider transferring your credit card debt to the card with the lowest interest rate. If you cannot fit all of your debt on to one credit card, then pay off one card aggressively while paying at least the minimum on the remaining cards. This way, you can reduce credit card debt on each card one by one in turn. As you erase credit card debt on one card, move on to the next one and repeat until you have paid off all your credit cards. One thing to be cautious about when transferring balances among credit cards is that the introductory low balance transfer rate may get hiked considerably after the introductory period has expired. Switching multiple times among credit cards to take advantage of introductory balance transfer rates can also backfire, as the normal higher interest rate could be retroactively applied if you transfer your money to another credit card within a year.
You could even consider cashing out any savings and investments to pay off your debt fast. It may sound counterproductive, but you need to think about whether your investment and savings are yielding more than your debt interest rate. If not, you are better off paying off your debt by cashing out your savings and investments, rather than holding on to them.
Another option is to borrow against your life insurance policy and use the cash to pay down debt. Typically the interest rate on borrowing against your life insurance policy is well below the interest rates you incur on your other debt, so you might as well pay off your debt first and then repay the loan on your insurance policy. But do make sure to pay it back, as your beneficiaries will have any outstanding balance and interest deducted from the payouts they might receive from your life insurance policy. You hardly want to pass on your debt burden to your loved ones once you've moved on.
In part 2 of this article, we will go over some other means of paying off debt fast and getting on with your life.