Ways to Pay Off Debt

The first step you should always take is to call your creditors and try to negotiate a better rate. Explain your financial situation and you will probably find that they are willing to help you rather than turn your account over to a collection agency and potentially never see any money. This step is often overlooked but it's easy to do and doesn't cost a thing.

Never pay the minimum due on your debt. The minimum is usually only a tiny percentage of the amount owed and when combined with interest rates, you'll end up taking years to pay off the debt. If you have a very high interest rate you may even be charged more each month than you're paying! One of the most efficient ways to pay off debt is to pay as much as you can each month. Make a budget and go over your expenses. Find anything you can shave off and direct that towards your debt. If your minimum monthly payment is $50, aim for $100.

If you have debt spread over a number of credit cards, sit down and take a look at your statements. If you have balances with interest rates ranging from 12-25%, consider transferring the high-interest balances onto the low interest cards. This won't get rid of your debt immediately but it is one of the ways to pay off debt by saving money in finance charges.

Here's a great strategy for paying off your credit card debts, one by one. Pay the monthly minimum due on the lower interest cards and put all your extra money into the highest interest credit card. When you have it paid down, move on to the next highest interest rate. Now you'll have more cash after paying off the last card. Keep up this cycle. This aggressive tactic is often called snowballing. As the Motley Fool puts it, "As your debts decrease, the amount of money to have to attack them increases. Your payments snowball until all of your debt is pummeled." This plan will show immediate debt-reduction and money-saving results.