How to Pay Off Debt Quicker

Decreasing your debt is a couple of steps away.

According to CreditCards.com, the average American household has over $15,000 in credit card debt. As of March 2010, the Federal Reserve reports that there is over 2.45 trillion dollars in consumer debt in the country. With numbers like these, it's no wonder that Americans are increasingly looking for strategies to pay off their ever mounting debt. Fortunately, there are a couple of steps you can take to cut down your debt in an expedient fashion.

Instructions

1. Stop spending on credit. A May 4th, 2010 article in the Financial Times points out that, once again, Americans are spending more than they earn. This process limits your ability to pay off your debts. One of the best ways to speed up your rate of debt recovery is to stop adding to the pile.

2. Pay more than the minimum amount owed to your creditors. A 2006 publication from Pennsylvania State University illustrated that paying the minimum amount every month not only slows down the repayment process, because it takes longer to pay off the original amount, but increases the amount that you have to pay off. Interest rates add to the amount you owe as time goes on, so paying more than the minimum can limit how much you have to pay back altogether, therefore speeding up how long it will take to pay back the debt.

3. Cut back on variable expenses. Credit consultants BCS Alliance define variable expenses as money spent each month that can be controlled or eliminated, like money spent on clothes, eating out or vacations. By eating in, SmartMoney.com reported in 2007 that you may be saving up to 60% on your food costs because of the markup that restaurants put on their dishes. Cutting back on things like cable packages, manicures, movie tickets and the like could save you hundreds of dollars in a month, which can in turn go toward cutting down the debt in your name.

4. Talk to your credit card companies. The New York Times reported in 2009 that credit card companies have become increasingly willing to settle your debts for a fraction of what you owe, giving the example of one man who was able to pay off half of his debt and have the rest cancelled by simply asking. If you find yourself trying to pay off your debts but falling behind, ask a credit card company representative if they would be willing to settle for less. While it may not necessarily work, if it does, you could find your debts paid off much faster than you thought.

Tips & Warnings

• Credit card debt that is not paid off quickly will only continue to accumulate, damaging your credit score in the process. Make sure you at least make your payments on time to ensure that your ability to attain credit in the future will not be damaged.

References

• BCS Alliance: Get out of Debt by Reducing Monthly Expenses
• CreditCards.com: Credit card statistics, industry facts, debt statistics
• "Financial Times": Americans spend more than they earn again
• Pennsylvania State University: Pay More than the Minimum
• SmartMoney.com: 10 Things Your Restaurant Won't Tell You

Resources

• "New York Times": Credit Bailout: Issuers Slashing Card Balances