How Do I Pay Off 50K in Debt in Three Years?

The summer vacation to Cancun. The cruise to Alaska. The flat screen TV for the Super Bowl. The Springsteen tickets. And the bar tab from the night you partied with the entire New York Rangers hockey team. What fun times! Odd thing, though, that it is not so much fun to reminisce about these and similar memories when they show up on your year-end credit card statement. Add to the memories the forgotten charges like weekly groceries, three-Martini lunches and haircuts and you've racked up serious debt — 50K! And you want to pay it off in three years? Buckle up.

Tally up your debts, expenses and income. Maybe you managed to get $50,000 in the hole on one credit card. Odds are, however, that you did it on multiple cards. You might even have an auto loan, student loan or personal loan to include in the mix. In any case, you've got to see where you stand.

Allocate income to your mandatory regular expenses. You've got to pay the rent or mortgage, utilities, transportation costs, healthcare expenses and such. Be tough on yourself when you do this. Remember the $50,000 pit you got yourself into and don't ration $1,000 a month for "entertainment." Distribute your resources to the bills that need to get paid. Include at least minimum payments on all of your credit cards or loans that make up the $50,000 you want to wax in three years.

Pay more than the minimum. If you have no other strategy to tackle your $50,000 worth of debt, at least use this one. Assume you have $50,000 of credit card debt, all at an interest rate of 15.99 percent. Assume your monthly minimum payment is 2 percent of the balance — $1,000. If you up the minimum payment by just a little — to $1,084 a month — it will take you six years to pay off your debt. Jack it up to $1,758 a month and you'll achieve your goal of paying off your obligation in three years. If you're feeling ambitious, $2,448 a month brings the payoff time down to two years.

Consider the snowball method to pay down your debt. With this plan, you sort your debts and pay as much as you can to either the one with the highest interest or the smallest balance first while just paying the minimum on all other debts. When you rid yourself of the loan with either the highest rate or the smallest balance, put all of your resources toward the next debt in line.

Call your creditors and explain your situation — either that you're struggling or that you are ready to transfer balances elsewhere. Ask for a lower interest rate, particularly on credit cards. If you lower your rate, more of your accelerated monthly payment knocks off the principal portion of the $50,000, as opposed to the interest on it.