To pay off debt quickly, list all financial obligations, break down principal and interest amounts and then construct a payment plan. Paying off debt is a critical step in building a reputable credit history.
- List all financial obligations
Debt can include credit cards, mortgage(s), student loans and auto loans. Track all of these items and then list them on an individual table or spreadsheet. Include all relevant contacts and payment options, such as check or electronic withdrawal.
- Break down principal and interest amounts
Interest considerations vary for each type of debt. For instance, credit cards may offer zero percent interest as an incentive to sign up for the program. For each debt item, break down the principal and interest balances outstanding. List these balances in individual columns. Be sure to include the associated interest rate, as this figure helps project future expenses.
- Construct a payment plan
The speediest approach is to first pay off the debt with the highest interest rate. This approach minimizes future costs. Determine a frequency period for the debt payments. This period can be daily, weekly, monthly or yearly depending on the terms of the debt agreement. If necessary, set up automatic bill payments to ensure that balances are reduced each month. Consult with a debt consolidator if looking to make one periodic payment to a single financial institution.