Four Quick Tips to Get
Out of Debt Faster
Myth No. 1: Consolidating my debts will get me out of debt sooner. Debt consolidation is a shell game. You think you’ve done something about the debt problem. But the debt is still there — you just moved it.” Debt consolidation seems appealing because there is a lower interest rate on some of the debt and a lower payment. However, in almost every case, the lower payment exists not because the rate is actually lower but because the term is extended.
Myth No. 2: Paying down my mortgage balance is always a smart move. Not necessarily. Mortgage debt is some of the cheapest debt you can have. Not only are rates lowest on this form of debt but also the interest you pay is tax deductible.
If you have other forms of debt, target them first, especially the biggest drain of all, credit card debt, where you may be paying 12 to 18 percent or more.
Myth No. 3: You shouldn’t use cash to pay down debt. Just run the numbers. Chances are your cash is earning you a paltry return in the 1 to 2 percent range, if you’re lucky. But credit card debt you continue to carry is sucking huge interest from your pocket.
If you take the savings to pay down (or pay off) that higher interest debt, it’s the same as getting an 18 percent return on your money — without an ounce of risk.
Myth No. 4: A few dollars won’t really make a difference. How much do you spend on coffee and little treats each day? If you apply just $10 daily to pay down existing debt, you can wipe out an $8,000 credit card bill in three years.