How to Get Out of Debt: The Real Secret

[Common Sense Party]

No, not much of a secret. They just have to put that in the title to entice people to click on it.

Still, some good--if common sense--tips here, including:

Small Problem #3: You Don’t Know Which Debt to Focus On

This can be one of the trickiest parts of getting out of debt, especially for those who have several credit cards plus other types of debt like student loans, medical debt, etc.

Small Action #3: In general, you want to pay off the debt that has the highest interest rate first. That’s because you will save yourself money by avoiding unnecessary and excessive interest charges over the life of your debt. But also see if you can obtain a lower interest rate: call up your lenders and ask them for a lower rate and if they say “No,” look into balance transfer options or even think about getting a consolidation loan. You can save a ton of money by lowering your interest rate a few percentage points.

Personally, I favor paying off the smallest dollar-amount loan first, even if it has a lower interest rate than some of the other ones. That way you free up some extra money when you pay off the smallest debt (whatever your monthly payment amount was), which you can then apply to the next biggest debt. It also gives you some psychological motivation, an attitude boost, when you see one of your debts wiped off the map. But that's me. That's how we got debt-free way back when.

Other good tips, and full article here:

http://finance.yahoo.com/news/debt-real-secret-100049112.html

Any personal success stories about getting out of debt? Tips?

[lastlib]

1. "...pay the debt that has the highest interest rate..." -- WRONG!!!!

CORRECT method is: Pay down the one that is COSTING THE MOST IN FINANCE CHARGES/interest! It may be a student-loan that's eating you alive, a high-interest credit card, or a low-interest card that has a high balance because you use it more because it has a lower interest rate. My grandfather used to say that paying interest was "buying a dead horse." The more "dead horse" you avoid buying, the better off you are.

While there is something to say for the psychological boost of paying off a smaller debt and being out from under it, while you're doing it, the debts that are killing you with interest continue to kill you with interest compounding. Get out from under the one that's killing you the most!