According to the Hoover Institution at Stanford University, total consumer debt in the United States topped $13.9 trillion in 2008. Many Americans are in debt to multiple creditors, and some don't see a way out. Carrying thousands of dollars of debt can be a struggle, and it can sometimes feel like there is no hope. However, there are several strategies you can use to get out from under that mountain of debt and get your life back.
Pay More Than The Minimum
The simplest way to pay off your debt is to get on a budget, find out how much extra cash you have available and pay more than the minimum payment on those debts. If you don't have any disposable income, you can consider getting a second job or even holding a yard sale or something else to scrape up some extra cash. Every little bit will help when it comes to fighting those interest payments.
Pay In Order Of Interest
Many people like to pay off their debts in order of the interest rates, ranking from highest to lowest. Mathematically, this will save you the most money in the long run, since loans with higher interest rates cost you more money in interest over time.
To do this, simply gather all the information about all the debts you have, and begin making a payment as much above the minimum as you can on the highest interest loan. Once that one is paid off, you can then move on to the next one.
Debt Snowball
Some people, instead of paying highest interest first, prefer to pay off their smallest debts first, then roll those payments into the next largest debt and so on. This is known as a debt snowball.
Although mathematically this will not save you as much money in the long run as paying the higher interest debts first, some people prefer this method as it gives them small "victories" in the beginning to build off of and gain confidence that getting out from under all that debt really can happen.
Tap Into Savings
Many people don't want to touch their savings in case of an emergency, but sometimes too much debt turns into an emergency. Consider using some of your savings to relieve the pressure of multiple debt payments, and consider the interest rate. If your savings account is giving you a 0.05 percent return rate, but you're paying 19 percent interest on your credit card, you're losing money hand over fist by letting your money sit in the savings account.
Debt Consolidation
It may not make sense on the surface--going into debt to pay off debt--but for some people, debt consolidation is a viable option for paying off bills.
With debt consolidation, you basically take out a large loan (some people prefer a home-equity loan) to pay off all your bills in one lump sum. You then make one minimum payment to whatever lending institution you received your debt consolidation loan from instead of paying off multiple lenders on your original debts. This can make making payments much less stressful, and can even save you money in the long run by possibly lowering your interest rate over all your debts.
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