Debt consolidation may seem like an attractive way to get rid of your debt, whether you plan to do it yourself through a home equity loan or similar method or whether you plan to work with a credit counseling company. Consolidation means you only have one payment to remember each month, and you may pay a lower interest rate. There are other ways to get rid of debt, too, so you can get your bills paid off even if you don't want to consolidate.
Step 1
Ask your credit card companies if they are willing to lower your interest rates. You can get rid of debt more quickly if you can lower the interest you pay each month, the Get Rich Slowly financial site advises. Lower interest rates mean more of each payment will go towards the actual debt balance. Call each company and make your request. They may refuse, but you can save hundreds of dollars in interest if even one bank agrees.
Step 2
Cut your household budget down to the bare bones. You must pay as much money as possible on your bills if you want to get rid of debt in a reasonable time frame. Often you will find more ways to cut back than you thought you would, Allstate Insurance says. For example, many people can stop buying coffee or snacks at work, avoid restaurant meals and rent movies instead of seeing them at the theater. Earmark the extra money for getting rid of your debt.
Step 3
Make a priority pay-off list that has your highest interest debts at the top. Allstate Insurance advises that going through your statements and making this list tells you where you stand. Once you get rid of the most costly debts, you will have more available money to pay off the lower interest accounts. Pay the minimum amount due on your low interest bills and pay as much as possible above the minimum on the more costly accounts.
Step 4
Shift the extra money onto the account with the next highest interest rate every time you pay something off. This compounds your ability to pay off your debts and helps you pay them off in the shortest possible time frame.
Step 5
Find ways to make extra money to pay towards the debts. Get Rich Slowly says you may be able to sell old items through online auctions or get a part time job to help you get rid of your debts more efficiently.
Tips and Warnings
- A good debt elimination plan requires you to stop incurring any new debts, Get Rich Slowly explains. It says to stop using credit cards for any reason, including convenience, cash back and other rewards or even emergencies. The site advises channeling some money into an emergency savings fund instead.
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