Rapid Debt Repayment: How to Get Out of Debt

Two years ago, I decided to get out of debt. I owed $11,500 in credit card and automobile debt. In less than ten months, I was able to payoff my debt and I have been "debt-free" for more than fourteen months. What is my "secret"? Read on.

First, I stopped borrowing money, making a commitment to a debt-free lifestyle. For the majority of my adult life, I was a credit card user. Now, I only use cash or a debit card. I stopped using my credit cards and I now live on a budget. If you want to reduce your debt, the first step is to stop adding to your debt.

Next, I created a list of all of my credit accounts. I ordered my list by account balances, lowest-balance to highest-balance. My goal was to rapidly payoff the accounts with low balances. I enjoyed the psychological boost of ridding myself of these smaller debts. You, however, may choose to list your accounts according to interest rate, listing accounts highest-rate to lowest-rate. Doing so will allow you to pay less interest, over time, but you will not receive the emotional boost associated with getting rid of those smaller accounts. A third option would be to payoff the account that "bothers" you the most. Do you have a personal loan or do you owe the IRS? Perhaps you would rest better at night if you could be rid of one of those "bothersome" debts.

Throughout my debt reduction process, I made sure that I paid all account minimums. The last thing that I wanted to do while getting out of debt was to incur late payment-fees or other penalties. Be sure that you always pay your account minimums. Remember, if you miss one payment on one credit account, you can be penalized by all of your other credit accounts. I suggest that you send your minimum payments in a week or two before they are actually due, so that you can avoid having to worry about a late-payment fee.

Every week, I would send an extra payment to the account on which I was focusing, remembering to use online bill pay. Making micro-payments throughout a month reduces your monthly average balance, which reduces the amount of interest that credit card companies charge. Why did I choose to send multiple payments throughout the month and not one, single payment at the end of the month? My budget runs week to week, and I wanted to get extra payments "out of my hands" so that I could not waste the money.

Finally, in an effort to reduce credit card interest charges, I called each of my credit card companies and requested that they reduce my interest rates. I called each company, once a month, and I was sure to be polite, remember names, and take notes. Twice, I was able to reduce my interest rates by over 5%! This technique works, especially after you begin to make some progress.

Good luck getting out of debt! Being debt-free feels awesome.