If you’re struggling with credit card debt, it makes sense that you want to pay it off quickly. The faster it is paid off, the better your credit. The faster it is paid off, the faster you can focus on saving money. The faster it is paid off, the sooner you can enjoy one less stressor. However, paying it down fast may not be your primary goal. You may, instead, look to pay it down as cheaply as possible.
The cheapest way to pay off your credit card debt isn’t the same for everyone. It depends on your balance. It depends on your interest rates. Finally, the cheapest way to pay off your credit card debt also depends on your assets. Let’s take a look at a few possibilities.
Use Your Savings
If you have a savings account, take a look at the amount of interest you’re earning on that money. Now take a look at the amount of interest you’re paying on your debt. If you’re paying more than you’re earning, consider cashing out your savings to pay off your debt. Wipe away your debt and then you can once again focus on building your savings. If you’re not making monthly credit card payments, you may be able to rebuild your savings quite quickly.
Can you qualify for a debt consolidation loan? If so, at what interest rate? Compare the interest rate of a loan compared with the interest rate you’re paying on your credit card debt. Most often you’re paying credit card companies much more than you’d be paying a bank. That being said, make sure once you’ve paid off your credit card debt that you cut up those cards. If you run up a balance on them, then you’re paying back a loan and paying on your credit cards.
Home equity loans can be an option depending on the market, how much equity you have in your home and interest rates. Additionally, a portion of the interest you pay on a home equity loan is tax deductible. However, like a debt consolidation loan, you’re in danger of running up your credit cards again and paying on two loans simultaneously.
Just Paying It Off
Finally, consider cutting back on your expenses and paying more than the minimum balance on your card each month. This is often the most effective and cheapest way to pay off your credit card balance. Get a second job, sell your car or move into a cheaper apartment if you need to. The faster you pay off your credit card debt, the cheaper it will be.
If borrowing isn’t an option, and we didn’t mention borrowing from friends and family, and you don’t have savings to pay off your debt, consider taking drastic measures. Take a second job, pick up some freelance work, or sell some valuables. You’ll be relieved once your credit card debt has been eliminated.