How Can I Pay Down My Debt Faster?

How Can I Pay Down My Debt Faster?

These experts' tips can help you pay off debt quicker.

In the Northeast, 75.4 percent of families currently have debt, according to the Federal Reserve’s Survey of Consumer Finances, which was released in October 2017. If you’re one of those families, it may feel like you will be paying off those debts forever, whether student loans or credit card debt. But these experts’ tips to paying off debt can help you get ahead and save money for big financial goals.

Experts agree that you should first pay down the debt with the highest interest rate, whether it’s credit card debt, student loans, or mortgage loans. Daniel D’Ordine, CFP, founder of DDO Advisory Services LLC, suggests paying down those debts aggressively even before saving for a down payment on a house or your child’s college education.

“If the student loan is a four-percent [interest rate] and the credit card debt is at eighteen, you want to attack that credit card debt as quickly as possible before putting it into an interest-bearing account for your down payment that is going to earn one percent,” he says. “As long as you have that credit card debt at eighteen percent, it’s not going away unless you really, really attack it aggressively.”

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One way you can attack credit card debt aggressively is looking into a balance transfer offer through a credit card company or your bank, suggests Kristen Euretig, CFP, founder of Brooklyn Plans. “Some credit cards will offer a balance transfer, which means that you basically shift the balance of one card to another,” she says. For example, a credit card company might have an offer in which you transfer your balance and are charged 3 percent for the transfer, but then have a promotional interest rate of 0 percent for 18 months. One downside is after the initial 18 months, you might have an even higher interest rate than your current card’s, so be sure to research the terms of the offer in advance, Euretig stresses.

As for student loan debt, there are a lot of repayment options with federal student loans. “People aren’t always familiar about what’s available to them, and student loan vendors are notorious for being really bad at explaining and relaying the different options to people, so a bit of online research might be helpful,” Euretig says. Or you can ask the lender, “What plan can I be on to have the lowest monthly payment right now?” and that can free up some of your money to attack credit card debt. Just keep in mind these lower monthly payments means the loans will take longer to pay off.