Money Talks, So Should You

Get out of debt: Do-it-yourself

Steve Rhode
by Steve Rhode, Dimespring Contributor  (@GetOutOfDebtGuy)

The most widely known choices for getting out of debt are credit counseling or a debt settlement plan. But you can “DIY” more easily than you think. Many consumers believe they can’t settle their own debt. But after looking into all of your choices, you may decide to pursue a solution you never considered – or even knew about. Whatever choice you make, it’s time to dig yourself out of debt.


If you can easily afford to make minimum payments and continue to save money at the same time, consider making this “DIY” choice:

Prioritizing your debt, to dig out faster.

Yes, I said you must save money while paying down your debt. That’s critically important to getting out – and staying out – of debt. If you use all your available funds to pay down the debt, and a financial surprise happens, without cash in the bank, the chances are very good that:

• your new debt will land right back on plastic, and

• wipe out all of the progress you made.

More from Dimespring:
Get out of debt: Credit counseling
Get out of debt: Bankruptcy
Get our of debt: Debt settlement offers
Get out of debt: Peer-to-peer consolidation loans

To make this strategy work, you need to take two steps:

1. make at least the monthly minimum payment due to each creditor

2. regularly devote extra money every month towards debt repayment

Mathematically, the best approach is to add the extra amount monthly onto the minimum payment due to the creditor with the highest interest rate.

As this example shows, if you make only minimum payments, it will take you more than 30 years and $127,696 in interest to pay off a debt of $29,000. By adding just $50 a month, you can unload your debt in eight years and pay $96,834 less in interest.

In my experience, the approach that works best for most consumers is to add the extra payment to creditors with the lowest balance, first. You see yourself making faster progress, which gives you the strong encouragement to continue.

As each creditor is paid off, roll the minimum payment, plus your extra amount, and apply it to the next debt you want to pay off in full. Your debt elimination plan will accelerate as each debt is paid off. This method takes only a few months more, but gives you a great emotional boost along the way as you watch the number of creditors you owe fall off faster.

Steve Rhode is a consumer debt expert who has been helping people find good solutions for bad debt problems since 1994. Having lived through financial problems, which led to his bankruptcy in 1990, he decided there must be better ways for people to face debt issues.