How to Pay Down Debt
To pay debt down as quickly as possible, you need to devise a solid plan and stick to it. Watch to learn strategies on how to pay down your debt quickly:
Get more tips with our Credit Health Insights article to learn more.
Video Transcript
To create the kinds of financial freedom you want in your life, paying down your debt responsibly is a must. Paying down revolving debt means saying hello to money and opportunities you're missing out on. First, how much can you pay? Add up your monthly expenses and subtract them from your monthly income.
How much of what's left over can you pay towards debt? Even just writing this down can help you visualize your debt situation. Next, try to reduce your rates on outstanding debts. One option is to consolidate your high interest credit into one low interest installment loan. Rolling several monthly payments into one fixed rate payment means you know how much to budget for each month.
Oh, and because there's an end date to your installment loan, you can put the day you're debt free in your calendar. Another option to reduce your rates would be to consider a balance transfer to a lower rate credit card. Just be mindful of any rates and fees. Taking the step to find ways to lower rates means more of your payments could go towards reducing debt, not towards interest.
Next, devise a payment strategy, like the avalanche method. Basically, tackle your highest interest debt first, while only making minimum payments towards the rest of your debt. When your highest rate debt is paid off, pay down the next highest one. Continuing to pay down your highest rate debts one at a time will save you money in the long run.
Or try the snowball method if you're looking for a few quick wins, where you pay off debt starting with the smallest balance first and the highest balance last. A feel good momentum can build after each debt you eliminate, and your credit utilization and DTI improves too. But know that you might pay more interest compared to other payment strategies.
Large credit balances take a big bite out of your monthly income, which can prevent you from living your life more freely. So don't let debt control you. Instead, take control of your debt.
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