debt elimination

Roll up your sleeves on debt elimination

There are several methods or theories about the most effective debt elimination process. Most financial experts advocate the application of power payments, or additional payments directly to your principle, as the most effective way to rapidly eliminate debt. Many of these experts would also recommend that you begin a roll up program by eliminating the debt that carries the highest interest rate first. Others recommend applying any extra cash resources to the debt with the lowest balance or to a debt you simply want to pay off early, like money loaned by a friend or family member.

Whatever debt elimination program you choose to follow, once you have selected your preferred roll up method, continue with your program until you have completely eliminated all non tax-deductible debt. For example, when your first debt is paid off, apply the monthly payment amount that you were making to the next creditor on your list. Or in other words, use the additional payment from the retired debt as an additional power payment to be applied towards the next debt in the roll up process. Regardless of the roll up method you chose to follow, it is critical that every precaution be taken to ensure that the roll up process is meticulously followed and tracked.

Money Saving Tips

Create additional cash flow by eliminating any debts that have large payments or through debt consolidation of higher interest loans. For example, you might have a 2002 mustang that has a balance of $1,250 and a payment of $440. With some simple math, you will quickly see that it makes financial sense to accelerate the payoff of this debt, even though it has a relatively low interest rate of say 6.8%. If you take the balance of $1,250 and divide it by the $440 payment, you see that it takes less than three months to retire this debt, with NO additional power payments. In other words, you get a large amount of margin, the $440 payment, in a relatively short amount of time. And, if you apply any additional power payments, you can reduce this number considerably, creating this margin in even less than three months.

You should also look for debts with low balances. Generally speaking, debts that have lower balances can be eliminated quickly and any additional power payments make a substantial difference.

This deals more with personal debts or debts that are owed to friends or family members. When creating your personal roll up plan, you can always adjust or accelerate the payoff of any debts owed to friends or family members that you want to pay off as soon as possible. Remember, this is your plan and you should custom tailor it to meet your specific needs.

The author Chad Sunyich writes about how to go for successful debt elimination. He says here for personal debts. To know more on debt elimination, credit card debt, credit report, Retirement speeches, visit www.idealfsi.com.

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