Paying Off Debt -- Fast!

Do you want to save big bucks? How would you like to pay off all your debts in record time?
A little organization and a "game plan" can help you do both! Here's how:

First, list and prioritize your mortgage debt, credit cards, auto loans, etc. with the highest interest rate first and the lowest rate last. Second, pay the minimum payments due on all but the highest interest rate debt. (Yes, you heard me right: pay the minimums on all but the highest rate!) Third, apply an additional amount, say, an extra $100 per month on the highest interest rate debt. Once this debt is paid off, you apply that payment plus your extra $100 to the second highest interest rate debt until it's paid off. Repeat the process for the third, fourth, fifth, etc. until you're debt-free.

Let's look at an example:

Joe has $100,000 of debt. It is broken down as follows:

Debt: Balance: Payment: Rate:

Car Loan - $20,000 - $387 - 6.0%

Home Mortgage - $55,000 - $348 - 6.5%

Credit Card A - $7,500 - $150 - 18.0%

Credit Card B - $2,500 - $75 - 12.0%

Student Loan - $15,000 - $145 - 3.0%

If we simply prioritized the debts to pay off by the highest interest rate charged, we would list them like this:

Priority: Debt: Balance: Payment: Rate:

#1 - Credit Card A - $7,500 - $150 - 18.0%

#2 - Credit Card B - $2,500 - $75 - 12.0%

#3 - Home Mortgage - $55,000 - $348 - 6.5%

#4 - Car Loan - $20,000 - $387 - 6.0%

#5 - Student Loan - $15,000 - $145 - 3.0%

If Joe pays only the minimum payment required on these debts each month, he will spend a total of $82,476 in interest over the next 30 years that it will take to pay off these debts.

Alternatively, if Joe were to prioritize these debts with the highest interest rate as first to pay off and the lowest rate as the last to pay off, and he applies $100 extra dollars to the highest rate debt until it is paid off, he would save lots of money and time. In fact, the time to pay off everything would be reduced to only 9 years and 2 months (compared with 30 years!), and the interest savings he would enjoy would be over $50,500!

So, instead of paying just the minimums or paying a little extra on each debt each month, you should consider putting together your own game plan. Simply list and prioritize your debts and routinely apply a little extra to the highest interest rate debt you have while just paying the minimums on the rest. Once the first debt is paid off, you apply that payment plus your extra $100 to the second-highest rate debt until it's paid off.

You'll be debt-free in less time than you think!