Tuesday, June 12, 2012

How to pay off your credit card debt quicker

It is important to get on top of your credit card debt because it has the potential to completely destroy your life and lead you to bankruptcy. I know it sounds a little dramatic, but that is the way like to address this kind of debt.

Say that you have 50k in credit card debt and that your minimum monthly payment is $1500 a month. If you only pay the minimum amount every month it will take 42 years to pay off the entire amount.

What happens if your circumstances change and you can no longer afford to pay the minimum monthly payments?

The quickest way to pay off your credit card debt is to make extra payments. There is a catch though. If you are now paying $1500 a month, the catch is to continue to pay this amount even when your minimum required payment goes down. If you consistently pay $1500 a month using this strategy, you will finish paying your debt in less than 5 years.

More often than not, people make the mistake to pay only the minimum amount and continue paying only the minimum amount even as the required amount reduces every month. That is the mistake. The trick is to start paying the minimum amount but, as the principal goes down and the required minimum monthly payment reduces, you need to continue paying the higher amount.

There you have it, a simple way of paying off your credit card debt much, much faster.

Click here for great resources on becoming financially independent.

For more information on how to eliminate unsecured debt refer to the following articles:

Personal finances management for when you are broke

Top 10 money tips to become debt free