If you are committed to reducing or eliminating your debt, here are some steps you can take to help lower your loan balances faster.

Before you start, you need to commit to not adding new debt. There is a saying that goes something like, "If you find yourself in a hole you want to get out of, the first thing you need to do is stop digging!" Make a budget to determine how much you can afford to pay on your loans each month. Next list the balance, payment, interest rate and after tax interest rate (you’ll need to calculate this) for each of your loans. Understand your loan terms, especially how and when your interest rate may change.

Review your credit report at your primary financial institution or your local credit union. You should be able to do this for free. See if you can replace higher interest rate loans with lower interest rate loans. It may be beneficial to go through this step with more than one financial institution and compare the ideas and rates you get from each.

At this point, make sure that the payment you budgeted is higher than the minimum payment for each of your loans. If it is not, revisit your budget. You need to make at least your minimum monthly payments and ideally at least a little more to proceed.

If you have made it past this step, the planning is done and it is time for action.

Each month pay the minimum payment for each of your loans and pay as much extra as you can afford on your highest interest rate loan. Use the after tax rate to determine your highest interest rate loan. If you have a loan rate that may change to your highest interest rate soon, consider paying the extra amount on that loan.

Update your list of balances, payments, and rates every month and track your progress. The balance of each loan should show some reduction each month and your total loan balance should decrease faster each month. As loans pay off, do not reduce the total amount you are paying. Periodically review your budget and if your budget allows, increase the total monthly amount you pay.

By consistently paying as much as possible on your highest interest rate loans, at the same time you commit not to add new loans, you will reduce your loan balances. The balance reduction will be slow at first, but as each month passes less of your payments will go to interest and more of your payments will go towards lowering your balances. As your balances decrease, so too will the interest you pay, until your final payment goes to reducing your loan balance with very little interest at all. As with any journey, you will get to your destination by taking a series of little steps, always with the end in mind. Remember, we are here to help you along the way.

Bill Lawton, President/CEO

^{Bill Lawton grew up and currently lives in the Plymouth community. He is the President of Community Financial, a not-for-profit community focused credit union where he has worked since 1982. He also volunteers for several local service organizations. Community Financial Ph: (734) 453-1200.}