How to Pay Down Debt like a Pro

No one likes to be in debt. In addition to constant and annoying calls from bill collectors, being in debt can rob you of your ability to purchase a home or a car. It will also make getting good interest rates on loans all but impossible. This guide will show you how to pay down your debt like a pro.

Difficulty: Moderate

Instructions

1. Control your spending. Start by making a list of all the things you buy each month. Look for the non-essential items on the list and eliminate them immediately. Then take the money you save and use it to start paying off bills or start a savings account.

2. Pay off your highest interest rate credit cards first. Once you pay off the loan or credit card with the highest interest rate, then move to the next highest interest rate loan and so on down the list. Once a loan is paid off, take the money that you were spending towards the paid off loan, and funnel it into paying off your additional debt.

3. Never make the minimum payments. If you can, especially on credit cards, always make more than the minimum payment. Paying the monthly minimum is usually just enough to cover interest, let alone start paying down the actual debt.

4. Don't make additional mortgage or car payments. Home loans and car loans often have the lowest interests rates versus other types of debt. If you have been making extra payments on these types of loans start putting that money towards paying off credit cards or personal loans instead.

5. Build a cash cushion. Always have three to six months of living expenses in savings. That way, a sudden emergency won't spell catastrophe for your finances.

6. Seek professional help. Don't wait until it's too late to call in a professional. If you have too much debt to dig out on your own, talk to a credit counselor or reputable debt consolidation firm.

Tips & Warnings

• According to research, the average American household has $9,200 in credit card debt. You can avoid this trap by saving to purchase things instead of being quick to use credit cards.
• Never borrow against your home or retirement plan to pay off debt.

[iamageniuster]

on 10/18/2008 Great tips. 5 stars! Thanks for sharing.