9 Tips to Help You Pay off High Interest Debt

March 13, 2013
By Quincy Enoch, Assoc. Dir. of Legislative Affairs & Military Liaison, National Association of Federal Credit Unions

Unfortunately, too many consumers have found out the hard way that paying off high interest debt can be a daunting task. Sometimes the sheer amount of debt along with the interest can be overwhelming. Since consumers in debt typically got that way through a series of bad decisions and poor financial management, it is not always easy to make the choices and take the actions to get out of debt.

With this in mind, I spoke with consumers that have dealt with debt, executives of financial institutions and financial counselors to come up with some tips to help you get started. They all were able to give me various tips. I have included those I see as most important, but the first tip on the list is one that I not only received from everyone I talked to but was also first on all their lists.

1. Seek financial counseling. The key to getting out of debt and staying out of debt is managing your finances appropriately. Many consumers explained to me that while they were able to dig themselves out of debt, if they didn't understand how to properly manage their finances they eventual found themselves back in debt. Speaking with a financial counselor will help you gain complete control of your financial situation. This will assist you in maintaining a stronger financial future even after you have paid off your debt.

2. Stop increasing your debt. Obviously, it is going to be twice as hard to pay down debt if you are still adding to it. You should stop spending on credit cards immediately, and refrain from taking on any additional unnecessary debt.

3. Renegotiate terms with your creditors. You should contact your creditors and explain your situation. They may work out a settlement or lower your interest rate. It doesn't always work, but it's guaranteed not to if you don't make any attempt.

4. Transfer your debt to the lowest interest rate possible. Take a look at all your credit cards. Find the one with the lowest interest rate. If it's not at the limit, consider transferring higher interest debt to that credit card.

5. Figure out your debt paydown fund amount. Develop a spending budget, and identify areas where you might be able to cut back. No one is suggesting that you come up with a budget that is unlivable, but you can use the money saved from trimming off your budget to pay down high cost debt.

6. Start paying it off. To save money and pay down debt faster, it’s good practice to pay the minimum on all debt except the debt with the highest interest rate. Concentrate on paying down the highest interest debt first because that debt is costing you the most.

7. Tap into savings. It is always a good practice to have emergency savings, but every dollar you have in savings beyond that is another dollar's worth of interest you will continue to pay. You should evaluate your financial situation and determine exactly how much savings you need.

8. Pay more than the minimum. Whenever paying off debt you should always pay more than the minimum.  Typically, paying just the minimum amount means only a small portion of the payment will actually go to the debt.  Most of the payment is interest charges. Paying even a small amount over the minimum could significantly reduce both the time it will take to pay off the debt and the total amount you will have to pay.

9. Don't give up. It's not likely that you got into debt in one day, and you won't get out of debt in one day. Taking ownership of your financial situation and learning how to manage your finances can be very empowering and relieve a great deal of stress.

More Articles on Paying Off Debt:

What is debt and why is too much debt costly?

Help me with debt: Where to get help with debt

How do I get out of debt?

Take the Pledge

I pledge to save money, reduce debt, and build wealth over time. I will encourage my family and friends to do the same

Take the America Saves Pledge

Tip of the Day

  • Written by Katie Bryan | December 23, 2013

    Tip to Save During the Holidays: Decide how much you can spend. http://ow.ly/pX9nu via @Bankrate

Saver Tips and Stories View all »

Don’t Laugh at Saving Spare Change

Written by | May 7, 2019

Virginia Saves saver, Brittany, decided to start saving again when she became a single mother. She thinks many women, and men, can relate. According to Brittany, “You work out a financial plan with a significant other, you get married and/or have children, you live together and pay bills. However, for one reason or another, life throws you a curve ball and changes the whole scenario. It is so important for a single person, especially a single parent, to have control over their own finances. We have to learn to use what we currently have, and make our paycheck last, to ensure our children and ourselves, are healthy and in a good place. America Saves emails have served as that voice, whispering to me, "It's okay! Day by day, you CAN save and you CAN take care of yourself and your children.”

Brittany’s #1 savings tip: Don't laugh at saving spare change, or an extra dollar from a paycheck. These small efforts are like all of the streams into a sea of water.

Challenging Herself to Save

Written by Sara Cooper | April 15, 2014

It all started when Marchale Burton overheard Alabama cooperative extension colleague Isaac Chappelle, coordinator of Alabama Saves, explaining how saving just a little bit – even change – is all it takes to become a saver. “I thought about that,” Burton said, “and wanted to see if it would work.” So, she challenged herself to see how much change she could save.

Read more...

Inspired to Build Savings By Starting Small

Written by Great Lakes Michigan Saves | April 19, 2016

With little-to-no money in the bank and living on a limited income with her adult daughter, Sharon wasn’t sure if building up savings for her future was even possible. “At my age, to put debts behind me would be a relief,” she said, but she wasn’t quite sure how to even get started with a savings plan. That all changed when Sharon attended the Great Lakes Michigan Saves Pay Yourself First Saver’s Summit during America Saves Week.

Read more...

Receive Updates

Sign up for Texts

Written by Tammy G. Bruzon | July 15, 2014

Sign Up

Sign up for Emails

Written by Super User | September 16, 2013

Get Emails

Take the Pledge

Written by Super User | September 16, 2013

Start Saving