High interest loans are difficult financial burdens to get out from under as the interest payments on the loan may dwarf the actual principle, making it nearly impossible to pay the loan down in a reasonable amount of time. The most common type of high interest loans are credit cards which boast extremely high interest rates and require minimum payments. Paying these loans down is possible by refusing to take on more debt, paying more than the minimum payment, sticking to a budget and lowering interest rates.

Cut Yourself Off

If credit cards are your problem, do not use them anymore. Place them in a drawer somewhere and only use them for emergencies. If you cannot afford to purchase a new car or appliance, make do somehow until you can afford it. Do not take out anymore loans. Deal only in cash or check and only pay with money that you already have in hand. This type of system ensures that you will not longer be putting yourself into further debt.

Pay More Than Minimum

Regardless of the type of high interest loan you have, you are most likely on a payment plan of some sort. The payment plan no doubt involves paying a minimum amount each month, but that minimum most likely only covers the interest, therefore if you only pay the minimum you will never be paying down any of the principle of the loan. Regardless of how much it is, get in the habit of paying a bit more than the minimum on each loan you have. Stick to this commitment and over time your principles will begin to diminish and so will your minimum payments. Continue paying more than the minimum until the entire loan is paid off.

Stick to Budget

It stands to reason that the reason you had high interest loans in the first place was because you were spending money that you didn't have. This is unfortunately true for a lot of people today, but that does not have to be the case. Take one month to determine what your actual expenses are compared to your income. If the two numbers you arrive at do not match up, make an adjustment so that they do. Cut back on spending money or decrease your cable bill. Do anything it takes to get your budget under control, while always paying more than the minimum on your high interest debt. Once you have paid off your high interest loans, make sure to never go back to a situation in which you have these types of loans again.

Lower Current Interest Rates

Once you get your current debt under control, the next step is to lower the interest rates on the loans that you do have. Lowering the current interest rates on your loans is done in two main ways: transferring balances to a lower interest loan or asking the lender to drop your interest rates. If possible find a zero- or low-interest lender to transfer your current debt, but if that is not possible, call your current lenders and request a lower interest rate. In many instances, you need to have never missed a payment and never have gone over your limit to be eligible for a lower rate.

Source:

Motley Fool: 9 Ways to Pay Off Debt

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