Your Getting Out of Debt Options.

Are you stuck with debt that you just don't know what to do with or where to begin paying it off? This has become a big problem in recent years. People decide they need credit cards so they can buy things on credit that they do not need just so they can keep up with the Jones. These are the people that think this type of lifestyle is sustainable and will not come back to bite them in any way. In reality, getting too far into debt, whether it be good debt or bad debt, will eventually crush them and they will not be able to climb out from underneath it all. The question you should be asking yourself is "Where do I begin paying off all of my debt"?

I graduated college in 2008 with nearly $31,000 in student loans and about $2,000 in credit card debt. Now this may not seem like a lot of debt relative to what you may have, but with a $20,000 salary, it makes it much more difficult get rid of all that debt. I still have trouble with the credit card and have about the same on it as I had when I graduated. That is something I am working on. I am paying about 40 dollars more than the minimum on the credit card every month. I transferred my balance from a credit card with 22% interest to a card with 0% interest for 12 months so it would be easier to begin paying down that debt.

I have a plan to pay off all of my debt. First here is how my debt is split up, I had loans out with the government totaling about $21,000 after I graduated. I had private loans totaling $10,000 for college. Then I have my credit card debt totaling about $2,000. My parents were nice enough to pay off a high interest private loan, so that helped a lot, and I understand that will not be the case for most people. So I have a payment to the Federal Government, to a Private Lender, my parents, and my credit card.

I have chosen the method to pay back the loans with the least amount owed first. I have been throwing as much money towards the remainder of my private loans as I can so i can pay that off first. After my parents paid down some of the loan I had about $3,000 left to pay off and I have that down to about $1000 now. As soon as that is paid off, I will take all the money I put towards that and throw it at my credit card debt. Once I pay that off that money will go towards my federal loans, of which I have about $17,000 left. Then I can finally start paying off my parents, who gave me that money without any interest.

This is the method that I have chosen to pay down my debts, as you just saw. Look at all of your debts that carry an interest rate with them, then list them in order from lowest balance to highest balance. This will be the order in which you will pay them off. The idea is to pay the minimum payments on every debt except the one with the lowest balance. You will throw all of the extra money you can at this debt so you can pay it off in the shortest amount of time that you possibly can. This extra money may come from extra you were paying on other debts or you may need to make some lifestyle changes to find room in your budget to pay some extra.

Once you have paid down that first debt, take all that money that was going toward it and focus it all on the second lowest balance that you have until you have that one paid off. You can then take the money going towards that debt and put it toward your third lowest balance. This is the cycle that you will ride until all of your debts are paid off. The reasoning behind this method is all mental. Once you pay off the lowest balance debt, then you will feel like you have accomplished something by doing so and you will be more motivated to keep doing the same thing and paying off the rest of your debt. You may end up paying more in interest that you would have otherwise, but if this is the method that will finally get you to get out of debt, then in the end it is all paid off and that is what matters.

This method of paying down your debt focuses on interest rates. The higher the interest rate, the faster you will want to pay down that debt. Make a list of all the debts you have and put them in order from highest interest rate to lowest interest rate. Once your list is done, take as much extra money as you can and focus it on the item that tops your list. As soon as that debt is paid off, move to the next item on the list and pay that one off. Throw all the extra money that you aren't using on the first debt at this one to pay it down even faster. Then keep doing this until you pay off everything that is on your debt list. This is the most logical option because you will be paying the least amount of interest with this method.

There are other things you can do besides having a plan to pay down your debt. If you have credit card debt, it would be wise to call all of the credit card companies you have a balance with and try to get them to lower your interest rate. It is at the very least worth the effort. You can also hide or cut up all of your credit cards so you are not tempted to take them out of your wallet to buy things that you do not really need to have. You can also do as I did with my credit card, transfer the balance to a card with 0% interest for a certain time period, this will help you pay it down faster as well. I hope this was helpful to everyone out there who has some debt they need to get rid of. I am in a similar boat you are and we can get rid of our debt as long as we set to it and have a plan in place to get it done.