You can pay off a large loan faster than you think.
To start with, you need a plan. First thing, you must promise yourself that you want to be free. That means no more debt, ever.
Let's say you have four different debts and can afford $1000 a month. Should you just pay each one $250? This seems easy enough, but it is not the best strategy. You are much better off first paying off the debt with the highest interest.
Get yourself a spreadsheet or make one on paper and do the following:
In the first column, list your debts in order from highest to lowest interest rate. In the next column, list the total amount of each debt. In the third column, list the minimum monthly payment for each debt. Do not include your mortgage on this spreadsheet.
Now, total the minimum monthly payment and add in what you pay for your mortgage, utilities, insurance, entertainment, medical, retirement, charity, and any other regular monthly expenses. Include a 10% payment to be set aside for emergencies.
Subtract this total from your monthly net income, (what you take home each month). This figure is your debt killer money! Now, if you do this exercise and come up with a negative number or your debt killer number is less than 10% of your net income, you need to either cut down on your expenses, (like cable TV, broadband, entertainment), or you need to get a part time job. You can save a lot of money by not eating out. Make all your meals at home, pack a lunch, and bring your own coffee. You can rent a couple of DVDs instead of going out to a movie. A small sacrifice now for a lifetime of freedom later!
Each month, pay the minimum on everything but the top debt, (the one with the highest interest rate). Then take whatever you have left in your budget, your debt killer money, and send it to the top debt.
When that debt is paid off, move on to the one with the next highest rate and do the same thing. Take all the money you were paying the top debt, plus the minimum you were paying the second debt and send it in each month. Keep doing this as each debt is paid off. You will be paying the same amount each month, but you will get out of debt much much faster using this method.
Once you have eliminated all the debts on your list, give yourself a 10% raise in your entertainment budget. Rework your budget sheet to include your mortgage, and start sending in the extra money your were paying towards your other debts to your mortgage company. Soon you will own your own home free and clear.
Freedom is within your reach. Go for it!
