5 Ways to Take Charge of Your Debt

Once debt starts to accumulate to an uncomfortable level, wrestling it back down can feel like an overwhelming task. Follow these strategies for becoming — and staying — debt-free.

Once debt starts to accumulate to an uncomfortable level, wrestling it back down can feel like an overwhelming task. First, take a deep breath. Then, write down all of your debt. Simply identifying your debt starts the momentum of getting it paid down. Keep that initiative going with the following strategies for becoming — and staying — debt-free. 

Get rid of high-interest debt first

This is the logical route — and the one most experts have long advocated. A revolving balance on a credit card with 18.9 percent interest or higher is much more costly than an auto loan with 0.9 percent interest. So you'll save on interest expenses by eliminating the debt with the highest interest first. 

Or, take the snowball approach

Some studies show that the fastest way to pay down debt is to focus on eliminating your smallest debt first, regardless of which accounts have the highest interest rates. Then apply those monthly payments to your next-smallest debt and so on. It’s called the "snowball method," and it can increase your chance of paying off debt by giving you a feeling of accomplishment every time you pay off an account.1

Pay more than the minimum

No matter which accounts you pay down first, to make progress you need to pay more than the minimum amount due. Any extra payment will go right toward the principal to reduce your balance. Cut back on expenses to free up extra cash — even canceling cable TV could give you an extra $100 every month, or $1,200 per year. But you'll really make headway when you can start to double, triple or quadruple your minimum payment. 


Consolidating many accounts into one has two benefits. First, it can offer interest savings when you consolidate debt at a lower interest rate. Second, it allows you to put all of your focus and available cash toward one payment. If you own a home, taking out a home equity loan or line of credit can be an effective way to reduce monthly payments and streamline your debt-reduction efforts. 

Give debt the boot forever

Once you've succeeded in getting all of your balances down to zero, give yourself a pat on the back — and then eliminate temptation. Narrow down your active credit cards to one or two with the lowest interest rates and cut up the rest. Don't close the accounts — it's actually good for your credit score to keep them open to establish a longer credit history. Just be sure to pay off your active balances every month, or at least pay them down— limiting debt payments to 10 percent of your monthly take-home pay is a good rule of thumb. And you should be well on your way to a life free from the shackles of debt.

• For debt reduction help, as well as information on home equity loans and lines of credit to consolidate debt, visit your local Rabobank branch
• For insights on freeing up extra cash to pay down debt, see DailyFinance's 5 Simple Ways to Cut Your Monthly Expenses
• To estimate how long it will take you to become debt-free, use CNNMoney's Debt Reduction Planner.


  1. “'Snowball' Debt Method Is Fastest Way To Pay Off Your Bills, Research Shows," Catherine New, Huffington Post Money, Aug. 16, 2012, http://www.huffingtonpost.com/2012/08/16/snowball-debt-method-fastest-way-to-pay-bills_n_1784166.html, accessed June 12, 2013

The information contained in this article is intended for general educational purposes only and is not to be construed as legal, tax, or financial advice. Please consult with your own legal, tax or financial advisor for guidance with your own particular circumstances.