First, there are 2 main reasons why you SHOULD NOT pay off debts fast.
- You have a sure-thing business venture and you need the borrowed money to fund it.
- You have cash-flow producing assets that cover what you financed.
However if you’re reading this, chances are neither of these apply. So let’s pay off these unwanted debts the smart way.
1. Don’t make any unnecessary big purchases.
This seems obvious, but it needs to be said. Buy things only with money you have. Use a budget to control thine expenditures and prepare for emergencies.
2. Handle debts in this order.
- Credit Cards
- Personal Loans
- Auto Loans
- Student Loans
Credit Cards and Personal Loans are wealth stealers. The interest rates are horrible. Pay these off first and fast!
3. Don’t pay anymore fees.
Bank fees can accumulate fast: ATM fees, bounced check fees, overdraft fees, maintenance fees, etc. Do what you must to avoid these fees. However if you do get charged a fee, call the bank or company to get the fee removed. This can also work with accrued interest.
Look at it like this. If a 10-minute phone call saves you $30, you just made $180 per hour.
4. Lower your interest rates on your debts.
This can be as simple or as complex as you want it to be, but there are many ways to lower your interest rates.
A. Transfer a balance
Depending on your situation, you can transfer your credit card balance to a card with a no-interest introductory rate. So while you’re actively paying down that balance, you will never accrue any interest charges. Just make sure you pay down the balance before that rate is over.
The fee for this ranges from 3-5% of the total balance, which is a lot less than the normal interest rate you will accrue month to month while paying down the balance.
B. Hire a Debt Consolidation Company
A company like Debt Consolidation Care can make things a lot cheaper for you. Read all about the debt consolidation process here.
C. Just Ask Your Credit Card Company
Everything is negotiable. You can call your credit card company and ask them to lower your interest rate. If you have great payment history, say it. Say whatever you have to, but get them to lower it.
If the credit card company agrees to lower your interest rate, no matter what percentage they say, act like it’s not enough and ask them if they can lower it just a little more. In many cases, you will get it.
D. Refinance Your Loans
This works best for auto loans as there are no closing costs like with mortgage loans. Some auto loan companies will even pay you to switch your loan. Credit unions often have the best rates for auto loan refinances.
5. Make extra money to pay off debts.
There are tons of ways to make extra money without extra work, many exist within your own purchases.
I’ll make individual posts about some of these later, but a quick mention if you want to get started is:
- Start a business so that you can enjoy amazing tax savings
- Switch bank account to one that has a welcome bonus
- Drive the speed limit as to not get any speeding tickets
- Take advantage of deals on our Free Money section
- Sell old items because they are only old to you
- Leave earlier and skip the toll roads
- Shop for better deals on insurance
- Look for better electricity plans
- Save on cell phone bill
- Save on internet
- Bring a lunch
- Read books
- Bring water
- Ditch cable
- Drive less
- Buy bulk
When you get the extra money, handle it this way:
- Set aside 10% for donations, tithes, and/or gifts
- Set aside 10% for investments
- Pay debt with the other 80%
This is better explained on our budgeting page.
Whether you use all of these methods or just one, you will quickly reduce your debt. You will also accumulate more wealth and have peace of mind over finances. Remember, change your focus and change your world.
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