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People take out loans or rack up credit-card balances for many reasons. They purchase homes, buy new cars, fund college, go on vacation and more—sometimes even adding emotion-driven expenses to the list.

All that debt can pile up quickly.

But what if you reduced or eliminated your debt? If you didn’t have payments being made out of your regular bring-home income, would you start a business? Go on that much-needed vacation? Put more money toward retirement?

The possibilities are endless.

Take steps to eliminate debt

If you have debt now (like most people), let’s move you toward those possibilities. Start by contacting all the creditors you owe and ask:

  • What is my current interest rate?
  • How much do I owe?
  • What is the minimum monthly payment?
  • Can you reduce my interest rate?
  • Do you have any specials?

You also can get most of this information from pulling your credit report from  (You can pull it once a year, for free, and it won’t impact your credit score.)

After that, I highly encourage that you list all those debts on a Debt Payoff Tracker. This gives you a great overall picture of what your debt actually looks like.

(By the way, I encourage you to print this Debt Payoff Tracker now. Many times, we put things off and promise to get it done, but it often falls by the wayside.  Let’s make a commitment right now to work on reducing your debt.)

Once you have the information you need, here’s what you do:

  1. List all of your revolving debts (e.g. credit cards), in order by the highest interest rate.
  2. Pay the maximum amount on the credit card with the highest interest rate.
  3. Make minimum payments on the rest of the cards with lower rates.
  4. Once the highest-rate card is paid off, take what you were paying on that one, and add it to the card with the NEXT highest interest rate.

Many people just make their regular minimum monthly payments and expect everything in the end to “all work itself out.”  With the right plan in place, however, they can get themselves out of debt a lot quicker and many times, reduce the amount of interest they are paying. And following the spreadsheet method will help you save the most money in the long term when tackling debt. 

Keep the goal in mind

The key here—and this is really important—is to make sure that when you remove a debt payment, it’s not time to go buy something new. (I know, easier said than done, but it’s so true!) You want to free up your cash, not build up more room for debt.  Imagine the feeling once you are done eliminating this high-interest debt. Think about how much extra cash flow you will have to put toward other things in your life.

You could:

  • Pay more each month towards your house or car.
  • Put more money in your retirement account.
  • Put more money back for emergencies.
  • Save more for your kid’s college.
  • And so much more!

What about debt consolidation?

I’m often asked, “What about debt consolidation?” And the answer is, if it’s the right product, it can be very helpful!

In debt consolidation, the financial institution combines various credits into one payment with a lower interest rate.  It can be beneficial for many, because continuing to pay minimum payments on high-interest credit card debt means you will be paying for many, many years. The amount of interest you can save with a debt consolidation loan—as long as you make sure it’s a lower interest rate—can be amazing! (But remember, if your new loan’s interest rate isn’t lower than you are currently paying, then you aren’t doing yourself a favor.)

Ask for help

One last piece of advice: Once you have your spreadsheet ready, bring it to your banker to come up with a plan to pay it off. Your banker isn’t just there for transactions. In fact, most bankers I know are eager to help people accomplish their financial goals and dreams.

Your banker should be your partner in this journey and can give you the reassurance that what you are doing is best for you.  They may even have a product or service that can help you in this journey to eliminate or reduce your debt!

Find more credit and debt advice

Learn more about managing credit and debt in the Resources section of our site.

Ben is responsible for enhancing Old National financial literacy initiatives by partnering with schools, colleges, universities, businesses, nonprofits and government agencies. In 2017, Ben was recognized by the National Financial Educators Council (NFEC) with its coveted Financial Education Instructor of the Year Award.

This content is not intended to provide legal, tax, accounting, financial or investment advice or indicate the suitability of any product or service for your unique circumstances. You are encouraged to consult with a qualified legal, tax, accounting, financial or investment professional based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.