The Meat And Potatoes Behind The Plan I Used To Pay Off My Credit Cards Fast
Listed below are several ways you can choose to get out of debt quickly. Each individual's circumstance or preference will depend on which one you choose.
The interest pay off – Targeting number 4 on the list above
Most credit card and mortgage companies charge you interest on the principal balance that is left each month. If you make larger monthly payments then the amount you have to pay goes down every month. However, the more you pay off the less interest you will have to pay each month. If you take the credit card or loan with the highest interest rate and apply more money to this card monthly, this will save you the most money. Once you pay off that credit card or loan then move to your next highest interest rate credit card or loan. Mortgages are generally the lowest interest rate you will have so you can leave this one for last.
If you have a loan that charges a set amount of interest over the entire life of the loan, you are better off just paying the regularly monthly payments. You will not get a decrease in the amount of interest so it is no benefit to pay extra money on this loan using the highest interest payoff strategy.
The minimum loan pay off – Targeting number 1 on the list above
Another way to pay off your debt fast is to pay off the smallest balances first. Look at your balances owed, which you should know from number 2 above. Start making extra payments on that smallest debt. Once you pay that off, take the monthly amount that you were paying to this last paid off debt and add it to the monthly amount due for the next smallest debt. For example, if you were paying $250 a month on your Visa card and now it is paid off. The next smallest debt is a Mastercard that has a monthly payment of $50. Take the $250 that you were paying to Visa and add the $50, which is the monthly payment due to the Mastercard, and make a monthly payment of $300 (250 + 50) to Mastercard. You will keep doing this for every debt paid off until eventually; you will just have your mortgage left. If you follow this same method for your mortgage, it will be paid off in record time and saving you lots of money.
The Highest payment pay off – Targeting number 2 and 3 on the list above
This strategy works best if you have a bunch of small loans and you have the money to pay them off. The strategy is to reduce the length of time and the amount of money you use to pay off these debts. You can choose either the debt that has the highest monthly payment or the least number of payments left. Using the latter method will greatly reduce your monthly payments faster. It will leave you with more money every month and especially good for those who are struggling with their finances.
In summary, paying the debt with the highest monthly payment first has the overwhelmingly biggest effect on the amount of money in your bank account. If you pay the loan with least amount of payments first, you will see a faster, not more advantageous, effect on your bank account.
Using these 3 methods helped me to pay off my credit card debt, get out of debt quickly and live the debt free lifestyle that I had dreamed of. If it worked for me it can work for you too.
Part I of the plan I used to pay off my credit cards
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