The next step is creating a schedule for paying down your debt:
- Pay off the debts that charge you the highest interest first.
Bob Hammond, author of Life Without Debt, recommends that you pay off the debts that are charging you the highest interest first, since borrowing from those creditors is costing you the most money. "Concentrate on paying off the high-cost debts as soon as possible," Hammond advises.
LaToya Irby, About.com's Guide to Credit/Debt Management, agrees. "Highest interest rate debts cost the most money, especially when those debts have high balances. So you'll save money on interest charges when you pay off those high interest rate debts first."
However, there are exceptions to this general rule. Irby notes, "If you’re likely to get discouraged because it’s taking a long time to pay off that high interest rate debt, you can start with the lowest balance debt. Getting some small debts paid off will motivate you to keep going."
- Pay more than the minimum payment.
Aim for paying more than the suggested minimum payment, in order to pay off your debts as quickly as possible.
Miriam Caldwell, About.com's Guide to Money in Your 20s shares this advice:
- Choose one debt to focus on.
- Increase your payment on that debt by as much as you can.
- Once you have paid off that debt, move all that you are paying on it to the next debt you want to pay off.
- You’ll be surprised at how quickly you can get out of debt with this plan!
- Meanwhile, continue to pay the minimum balance due on all of your other debts.
Record what you intend to pay toward each debt on the debt chart you made in Step 1.
Caldwell, Miriam. Email interview. 27 Oct. 2008.
Hammond, Bob. "Debt Free Key: 10 Steps for Coping With Credit Problems." Life Without Debt. Franklin Lakes, NJ: Career Press, 1995. 31-32.
Irby, LaToya. Email interview. 24 Oct. 2008.