Donna Writes and Asks “What Is The Best Way To Become Debt Free The Fastest?”

“Dear Steve,

We owe about $70,000 on our mortgage (we pay $100 extra each month), we have a $110,000 equity line and about $20,000 in credit card debt. We pay extra on each but don’t seem to be getting anywhere very fast. We want to be debt free.

What is the best way to become debt free the fastest.


Dear Donna,

Thank you for writing to me and asking for advice.

Since you did not mention any savings I think the best thing you can do right now is actually stop making the extra payments to the cards and mortgage, instead just make the minimums and put all the extra money into one of the high paying online savings accounts like ING. I’ll insert one of the ING banners so you can see what the current rate is.

The banner above will update automatically with the ING current rate as it changes.

So those of the debt snowball or debt snowflake debt reduction world right now are shaking their head and saying I’m nuts for telling you to stop sending extra payments right now. But here is my logic, you decide for yourself.

Currently the country is going through a difficult economic time. The odds are that we are just entering it and that things could get a whole lot worse for people before they get better.

Paying down your debt at times like this is good but having no debt is even better! But also at times like this Cash is King. You won’t have any idea from day-to-day if your home equity line will be cancelled or your credit card limits reduced. Last I read nearly 20% have already had their limits reduced and some to just above their current balances. If either of those things happen then your access to emergency money or credit is severely compromised and while you’ve done an awesome job of reducing your debt you may not have access to credit in an emergency.

At the end of the year you can decide what you want to do with some of your emergency cash. You might want to then make an extra mortgage payment to reduce your balance, you might want to send a lump sum payment to your highest credit card balance or highest interest rate card. The choice is up to you.

While the correct math based answer is that you should send the extra payment to the card with the highest interest rate, if that end of year lump sum payment would eliminate one or more of your lower card balances, you might get greater emotional satisfaction for eliminating those, and that’s important. It is really nice to wake up the next day and know you have few creditors to repay.

Just don’t do anything like a debt settlement or debt management program right now. You do need to do that and it will only hurt your credit report and credit score. My plan helps to improve your credit report and credit score.


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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2 thoughts on “Donna Writes and Asks “What Is The Best Way To Become Debt Free The Fastest?””

  1. IM looking at a dept settlement company. My card companies have reduced all of my limits, tried to increase my APRs(or close the cards), and this has lowered my credit score 100 points. I did not have late payments or delinquincies to cause this. They said, “after reviewing your accounts and other dept, we have decided as a business move to…..” do all this. I was told by the dept settelment company to stop paying the cards, the after about 3 months they would go into negotiations to pay a percentage of the total. Im now thinking why pay them $50 a month and 12% of the total dept i owe to do this for me. Can you give me some advice?

    • The instructions to stop paying cards which damages your credit is one of the issues the new Debt Settlement Consumer Protection Act hopes to eliminate.

      The premise of debt settlement is simple: the consumer is advised to stop paying their creditors and instead make monthly payments into an escrow account to accumulate money. The debt settlement company promises to use the account to strike a bargain with creditors. The company claims it will negotiate with the consumer’s creditors and convince them to accept partial payment in full satisfaction of the amount owed by the consumer.

      In reality, the vast majority of debts do not settle. In fact, many credit card companies refuse to work with debt settlement firms. Not only are consumers out the hefty fees charged by debt settlement companies, including up-front fees (often a percentage of the total debt), fees to set up escrow accounts, and monthly maintenance fees. They also often are sued by their creditors for the balance due – which, perversely, has grown larger as a result of the debt settlement companies’ advice to consumers to stop paying their debts. – Source

      It seems like your logic and reasoning is pretty sound.



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