Four Ways to Get That Burdensome Debt Paid Off

Forget the rising price of gas or food. None of these can hold a candle to debt which compounds monthly. If you're in debt, the best thing to do is to pay it off as quickly as possible. The longer you wait, the more excessive it can become.

From the Motley Fool, consider these four tips to pay off your debt:

1. Pay more than the minimum. First, break the habit of paying only the minimum required each month. Paying the minimum -- usually 2% to 3% of the outstanding balance -- only prolongs the agony. Besides, it's precisely what the banks want you to do. The longer you take to repay the charges, the more interest they make, and the less cash you have in your pocket. Don't play their selfish game.

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2. Cash out your savings account. You could cash out your savings and investments and use the proceeds toward debt repayment. Yes, no one wants to do that. But sometimes it's foolish not to do so. Even when debt interest is at 12%, your investments would have to pay more than 18% before federal and state taxes to equal that outflow of dollars. It's doubtful that the dollars in your savings account are earning anywhere near that rate of interest. Pay off the debt, and it's the same as getting that 18% return without any risk on your part. The higher the interest rate on your debt, the more attractive repayment versus investment becomes.
3. Borrow against your life insurance. Do you have life insurance with a cash value? If so, borrow against the policy. Yes, you're borrowing your own money. But the interest rate is typically well below commercial rates, and you can take your time repaying the loan. Do repay it though. If you die before it's repaid, the outstanding balance plus interest will be deducted from the face value of the policy payable to the beneficiary. While that seems a small price to pay to get out of debt now, it could be burdensome to your loved ones.
4. Renegotiate terms with your creditors. You feel like you're against that proverbial wall. The money just isn't there. Is bankruptcy the only way out? No way. Try pulling an ace out of your sleeve prior to taking that step. What ace? The threat of bankruptcy, of course. Let your creditors know your situation. Tell them that if you are unable to renegotiate terms, you'll have no other recourse but to declare bankruptcy. Ask for a new and lower repayment schedule; request a lower interest rate; and appeal to their desire to receive payment. Faced with the prospect that you may resort to such a drastic step, creditors will do what they can to protect themselves against a total loss.