How to Pay Back Debt

Getting out of debt is easier if you stop using the cards.

Getting out of debt is easier if you stop using the cards.

Credit card debts, student loans and car payments can team up to make your blood pressure go through the roof. Whether you went wild with the plastic, or got loans to complete your degree, there will always come a time when you have to pay the piper. Paying off debt doesn't have to be a stressful venture if you put a plan in place and stick to the plan.

List each debt that you owe. Include all credit cards, student loans, car payments and medical bills. If you borrowed money from Uncle Joe, list that as well. Put the debts in order from smallest to largest. Be sure to record their monthly due dates and minimum payment requirements.

Design a household budget, listing the bare minimum you will need each month for living expenses. Don't forget to put a percentage away in savings for emergencies. Dedicate any excess funds to paying back debts.

Choose one debt each month for which you will either pay off or apply a large sum toward the principal of the loan. While making your minimum monthly payments, you will begin to knock individual debts off the list with lump sum payments. Finance expert Dave Ramsey recommends paying the smallest debts off first so you see some immediate successes. He calls this the "snowball plan" since it will motivate you to keep going if you see the list getting shorter quickly.

Stop using credit. It can be discouraging to incur more debt while trying to pay down current bills. Adopt a cash and carry policy. If you do not have the cash for it, don't buy it. Obviously, emergencies, such as car breakdowns, may occur. In those cases, pay the credit card bill for it before the due date. Once it is paid, return to the "snowball plan" of paying off entire debts when possible.

Pay large debts. Once you have paid off a few small debts and gained some momentum and success, you need to focus on the larger debts. Choose a credit card with a high interest rate, and apply a set amount each month toward the principal in addition to the regular monthly payment. You may be surprised at how quickly the debt goes down once you start applying money directly to the principal.

Consolidate remaining debt. Secure a low interest consolidation loan that will allow you to pay all remaining debt in full. Once the loan has taken care of all debts, including your high interest credit cards, begin paying lump sums toward the loan principal each month along with the minimum monthly payment. The loan will have taken care of credit card interest, leaving you with one payment. Use the money that would have gone for all the credit cards to pay down the loan principal to become debt free.

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