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How To Pay Down Debt


For greater peace of mind & more to spend or save.   


Make a Plan that Gets You "Out from Under"

The Short-Term Pain is Worth It

The faster you pay your debts:

  • The less interest you’ll pay.
  • The quicker you’ll be debt-free.
  • The more hard-earned money you’ll have to spend or save as you see fit.

So make a plan:

  • Check the rates you’re paying.  There could be a better deal out there.
  • Make a budget and determine how much MORE you’ll use each month to pay down your debts.  Use our Figure Out a Budget in 3 Minutes to make a basic budget.  It’s all most people need.
  • Determine which debt you’ll pay down first and which you’ll pay down next.
  • Then pay down your debts! And keep your statements & track your progress – to stay motivated & get where you want to go.

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    header-small How Long Till You Pay Off A Debt   
    input Debt Amount 
    input Annual Interest Rate 
    input Current Monthly Payment 
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    header-small If You Switch to the New Payment 
    billboard-small Current Months To Pay Off  Months If You Switch
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    Check the Interest Rates You Pay

    On Your Mortgage, Auto, Student Loans & Credit Cards

    Compare what you pay to rates advertised on-line, in newspapers and magazines.  Ask friends and family what they pay.

    If you are paying high rates on auto, student, or credit card loans, consider consolidating your debt

    • If you think you are paying too much, get your credit score – your credit score matters.  (See How To Improve Your Credit.)  Then find out the interest rates charged for people with scores in your range.
      • If you can improve your credit score, do that right away!
      • If you are paying too much, call your lender and see if you can get a lower rate.  Ask to speak with a supervisor if you can’t get anywhere with the first person you speak with.
      • If you can’t negotiate a lower rate, consider switching lenders.
    • If you have a hardship, ask your lender or a legitimate credit counselor about
      • Forbearance. A plan that freezes your account and sets up automatic monthly payments.
      • Debt Management. Where you work with a credit counselor.
      • And watch out for debt-collection scams that prey on people in financial trouble.
    • If you are paying high rates on auto, student, or credit card loans, consider consolidating your debt in a lower-interest home equity loan or by refinancing your mortgage.  Your new interest rate should be lower and tax-deductible.  But know if you can’t make the payments, you could ruin your credit AND lose your house. See Learn About Home Equity Loans & Lines of Credit and Figure Out “If You Refinance …”

    Are you paying too much? What Americans paid in interest last year:

    Type of LoanAverage Yearly Interest Rate
    New Car4.25%
    Credit Card14.5%

    The Game Plan

    General Rules & Strategies

    General Rules

    • Pay off debts handled by a collection agency – your credit is at risk.
    • Don’t fall behind on any debts – pay at least the “minimum due” to ward off collection agencies.
    • Try not to add more debt – even more low-interest debt.

    Two basic strategies.  Pick the one that makes most sense to you:

    • Pay off your smallest debt, then the next smallest, then the next.  You’ll soon have fewer bills and creditors, and see “light at the end of the tunnel.”
    • Pay off the debt with the highest interest rate, then the next highest, then the next – and don’t reduce the amount you use to pay down debts until you’re “out from under.” It’s the quickest & cheapest way to pay off what you owe.

    To see how fast you could be debt-free, CLICK HERE

    Borrow Smart 

    While You're Paying Down Debt, Don't Borrow Stupid

    Even though you’re paying down debt, you might borrow to buy a house or a car, or even charge day-to-day expenses on a credit card.

    So keep yourself from borrowing stupid, Learn About Borrowing Smart.

    Get It Done

    Nothing Happens Unless You Make it Happen

    Print out this How-To and put  reminders in your calendar to help you move from How-To to Done!

    From Kiplinger.com



    Related Programs


    It’s often hard to know how much you’re spending – until you overspend.  So set up a system that puts you in control.

    How To Manage Everyday Spending


    Small changes can have a big impact.

    Figure Out Where to Cut Spending

    Learn More

    There’s nothing wrong with borrowing – we all borrow to buy a house or a car – as long as you don’t borrow stupid.

    Learn About Borrowing Smart


    To 1) cut your payment, 2) pay it off faster, 3) get cash, or 4) switch to a fixed or adjustable rate loan.

    Figure Out "If You Refinance ..."