7 Ways to Pay Off Debt Faster

February 4, 2011 Posted by Guest Writer in Finance, Lifestyles

Author Bio: Ella is part-time writer that is working on her Master’s degree in Finance. She contributes to a number of different financial websites on anything from health insurance to finding cheap car insurance quotes. When she is not studying or writing she is probably in her yoga class.

The 4 letter, dirty little word that almost everybody was deal with is debt. The housing crisis illustrated in a big way how serious debt can be. People lost and are continuing to lose their homes because they took on too much debt.

Credit card debt is near all time highs and more people than ever are feeling the stranglehold that debt can apply to even the nicest people. Dealing with debt is one of the major factors that not only is holding the country back, but also making it more difficult for the economy to move forward.

How do people get themselves into so much trouble with debt? Well, in a buy now, pay later society, using credit to get something you want but don’t have the money to pay for makes it easy to quickly run up debt.

Losing one’s job or source of income can quickly throw someone in to debt. You may have to borrow to pay your mortgage and run up your credit cards just to meet basic needs like food or gasoline. An accident , getting sick or suffering a medical emergency are all common situations that can put one deep in debt. An uninsured stay in the hospital can set you deep in debt. Whether through irresponsible spending habits or through the unexpected financial challenges of everyday life, when debt becomes out of control, you must address the issue.

For many deep in debt, bankruptcy is an option. For the rest who may feel an obligation to repay borrowed money, the key is to come up with a well thought out plan to attack the problem and pay off the debt. Following are 7 ways to pay off debt faster.

#1 Increase Your Income

This is the most logical way to get out of debt as quick as possible. The more money you earn, the more you will have to be able to pay down or eliminate the debt. While it might be easier said than done, there are ways, even in this difficult economy to increase your income. The first place you should turn to is your current job. Perhaps there are opportunities to work a few extra hours each week and earn some overtime. Maybe there is a new position opening that pays more and for which you are qualified. Apply with your company. If the money you earn at your regular job is not likely to increase, than you must look elsewhere.

There are plenty of part time jobs advertised every day. Swallow your pride and take any part time job where you can earn some extra money. You may have to work at a fast food restaurant, deliver newspapers or provide janitorial services, but, a extra hundred or two each week can help. Don’t get discouraged. Remember, this is only a temporary situation. If a part time job does not work for you, you can always try to create an income stream by offering your services around the neighborhood.

Whether you form a business or just do something on an informal basis, there are opportunities for the truly industrious person. Perhaps you can clean out garages. Maybe you can do yardwork. Able to run a pressure washer? Babysitting? The list of possibilities goes on. If you can provide a service, you can earn money.

#2 Spend Less Money

It might seem that every dollar you have is spent just as soon as you get it. Almost everybody spends up to the amount of their income and that becomes an ingrained behavior. Sit down and create a monthly budget. List all of the expenses you absolutely can’t cut. This list would include such things as a mortgage payment, utility bill, and food (although you can cut back by making smarter choices or eating a little less).

Then, list all of the other, more flexible expenses like a cable tv bill, allowance for dining out and other forms of entertainment. Smoking cigarettes can cost a $100 or more per month (not to mention smoking cigarettes can have additional costs). Get rid of the morning paper and cancel your magazine subscriptions. Cancel your expensive personal trainer workout sessions and either work out on your own or choose a much cheaper online personal trainer. When you look hard enough, you will see opportunities, some hard and some not so bad, for cutting back on spending and learning how to save money. The more you can cutback on, the more money you’ll have available to attack the debt.

#3 Negotiate with Your Creditors

Having 5 or 6 credit cards with high interest rates and large balances can lead to hundreds or thousands of dollars each year in payments above and beyond the principal. You may only be able to pay the minimums each month which will keep you in debt for many years. Sometimes, you can call the credit card company, explain your difficult financial situation , and request some help.

The more sincere you are and the better you negotiate, the more likely the creditor is to give you some sort of help. They may lower the interest rate, either permanently or for a certain number of months, making each payment work harder to reduce your balance. Sometimes, they will waive late fees or other extra charges that only add to your debt.

In some cases where you have stopped making payments and threaten bankruptcy, you may be able to negotiate a payoff at a percentage of the total balance. It may work with some companies and not with others. Know your rights under the FCRA and every little bit helps and you have nothing to lose by asking.

#4 Get Rid of Those Expensive Car Payments

Paying $400 or $500 per month just so you can drive your favorite car makes no sense when you are deep in debt. If you still have 3 or 4 years of high payments left on a car loan, sell the car! Even if your car is worth less than what you still owe, and will still owe some money to the finance company after the sale, you will be in a better financial position. You may have to get a cheap car and drive it for a while as you reduce your debt, but it is well worth it and you may even end up with cheaper car insurance! Remember, attacking debt can involve some painful choices, but becoming debt free will give you back your life.

#5 Sell Some Stuff

We all have some stuff around the house that we don’t need or want. Raise some money by holding a garage sale or perhaps listing your items on eBay.

#6 Consider a Consolidation Loan

Gathering all of your credit cards, evaluating just how much credit card interest you are paying, and then paying off the balances with a low interest consolidation loan can make it easier to get rid of your debt more quickly. Remember, if you borrow money at a lower rate to pay off your credit cards, stop using the credit cards! Otherwise, you’ll probably saddle yourself with a consolidation loan payment and more credit card payments.

#7 Change Your Attitude

Perhaps the most important way of all to get rid of your debt. Whether you need counseling or do it on your own, changing the way you look at money and living a responsible financial life from this moment forward, will yield great benefits. Get started now!

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