Strategies to help you pay off debt

Always pay more than the minimum.

By only paying the minimum amount due each month, you are likely paying the credit card companies thousands of additional dollars in interest. Instead of only paying the 2 or 3 percent minimum outstanding balance, cut out some luxuries to pay off debt. Do you shop too much to keep up with the latest fashions? Go out for dinner and order drinks and dessert? Cut some of these luxuries out and apply the extra money to your debt repayments. To pay off debt takes time and dedication!

Focus your debt payments to pay off your debt

To quickly pay off debt you can focus all your repaying power onto the one or two credit accounts that carry the highest interest rates. Also, try and transfer as much debt as you can from higher interest carrying accounts to the lowest interest rate accounts. As you begin to pay off your debt, you will increasingly have more and more amounts of money to pay off the debt! This is because money that was previously spent on interest will now be sitting in your bank account paying you interest!

Empty your savings account

And use the money to pay off debt! Most bank accounts don't earn nearly the amount of interest as you are likely paying on your credit balances. Taking into account federal and state taxes and you would have to be earning a significant more amount of money than you probably are.

Borrow through your life insurance to eliminate debt

If you have life insurance that carries a cash value...borrow against the policy! Even though you are basically borrowing against yourself, it will most likely be at a much lower rate than you are paying on your outstanding debt balances. Pay off debt with insurance when you know you'll be able to replenish the account in the near future. Any money borrowed against the account and not repaid back will be deducted from the face value of the policy whenever you end up kicking the bucket.

Ask friends and family to help you pay off debt.

In a worst case scenario you can always look to friends and family for financial help. If you can convince them to lend you money to pay off debt, then you'll probably garner a favorable interest rate. The downside is that borrowing money is one of the fastest ways to cause family strife. Be very careful with this option and use it as a last resort. Certainly write up a written contract including the repayment schedule.

Consider a home equity loan

If you own your own home and have built up some equity, consider taking out an equity loan or line of credit to pay off debt. The interest on a home equity loan will probably be somewhere between 8% and 10%, but with the tax advantages, the effective interest will be somewhere closer to 5% to 7%. By applying the proceeds of the loan to you outstanding debt, you will be able to favor a much lower interest rate. The only thing to watch out for is you don't go rack up more credit card debt after you just paid off your balances. Then you will have lost some of the equity in your home and also have racked up additional debt! Now you are twice as worse off as when you started! Watch out!

Paying off your debt by borrowing from your 401k.

If you have a 401k it could be another great source of funds to pay off debt. Many 401k plans allow the participant to borrow either 50% of the accounts value, or $50,000, whichever is smaller. Interest rates are usually about one to two percent above prime, and thus much cheaper than that found on credit card accounts.

Negotiate with your creditors about your goals to become debt free

If all else fails and you're still feeling the squeeze of debt then consider informing your creditors of your financial situation. Let them know that you are considering filing for bankruptcy and that if they are unwilling to negotiate you will be forced to file for bankruptcy. To pay off debt you can ask for a lower repayment schedule, request a lower interest rate, and remember that they will do anything they can to at least get some of the money back.

If all else fails, consider bankruptcy.

When debt repayment is impossible consider filing for bankruptcy. The fact that you filed for bankruptcy will be apparent on your credit report for 10 years making it difficult to obtain credit during this period. There are two types of bankruptcy Chapter 7 and Chapter 13. Chapter 7 allows discharge of almost all your debts. The debts not discharged include alimony, child support, taxes, loans obtained through filing false financial statements, loans not listed in the bankruptcy petition, legal judgments against the petitioner, and student loans. Even though Ch 7 lets you get out of paying most of your creditors, you will likely lose much of the property you own to pay back your debts. But in general, you usually get to keep your car, tools of your trade, your home, and much of your personal property. Ch 13 is a bit different. It's called the wage-earner plan because if forces you to give up control of your finances to the bankruptcy court, but it allows you to keep your personal property. The court maps out a plan for you to pay back your creditors over of a three-to-five-year period, and is based on your financial resources at that time.