How to Ditch Your Debt Before the Fed Sets Further Rate Hikes

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With the first of seven potential federal interest rate hikes taking place last week, it’s a good time to evaluate your debt — and see how you can make short order of paying it off before rates soar higher.

See: 19 Ways To Tackle Your Budget and Manage Your Debt
Find: Suze Orman, Dave Ramsey and More Experts Give Their Top Advice About Getting Out Of Debt

The Fed’s increase in the prime interest rate won’t necessarily affect consumer interest rates across the board immediately, especially if you have good credit. But if you have adjustable rate debt, such as credit cards with variable interest rates or even an adjustable rate mortgage, it’s time to brace for yet another hit to your budget in the coming months as those rates could rise.

Psychotherapist and confidence coach Karol Ward recommends figuring out what will motivate you to pay off any debt faster. Are you motivated by punishment or reward? First, visualize what it would feel like to have to pay more interest, she told The Wall Street Journal. Then, visualize the feeling of having all your debt paid off. “You’ll recognize quickly by either feeling energized or discouraged which decision is best for you,” she said.

Once you’ve gotten yourself into the right mindset to pay down debt, you can take more practical steps.

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Take Stock of Your Debt

Before you make a move, you’ll want to know exactly what you’re looking at in terms of your debt. Track down all your outstanding balances, credit limits, and the interest rates you’re currently paying.

Use a spreadsheet, a white board, or accounting software — whatever method works for you — to write down all the information.  

Choose a Repayment Method

Experts typically recommend one of two methods to tackle debt: the debt snowball or the debt avalanche. Using the snowball method, you’ll pay off the smallest credit card balances first. Once it’s paid off, you’ll take the payments you were making on that card and put the money toward your next highest balance, and so on. The snowball method creates psychological victories early on that will inspire you to continue.

The avalanche method actually makes more sense from a practical standpoint, since you will focus on your higher interest debt first. However, if you can reduce all your interest rates with a 0% interest credit card or a home equity loan, the avalanche method may not be the best option.

Of course, in both cases you’ll want to continue making the minimum payments on all your cards to preserve your credit score.

Try to Lower Your Interest Rates

It might be worth your time to call your creditors and see if they will reduce your interest rates. They might be willing to work with you if you have good credit and have made all your payments on time.

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Evaluate Your Budget

Now, it’s time to free up some extra cash so you can make more than the minimum payments on at least one credit card. Evaluate your budget and see where you can cut corners. Can you eliminate one or more streaming services? Dine out less?

You might even go to an extreme and implement a “spending freeze,” a scenario wherein you vow to purchase only the necessities for a month or longer.

Benjamin Rickey, a Washington-based financial planner, suggested spending as little as possible and “selling any assets you don’t need right now,” which could include collectibles, he told the WSJ.

Consider Debt Consolidation

If your credit is good, consider consolidating your debt through a credit card with a 0% introductory APR or through a home equity loan or home equity line of credit. Be sure to factor in balance transfer fees on the credit card — and home appraisal and closing fees on any loans — to determine if the decision is worth it.

Learn: Student Debt Reprieve: Could Payments Be Paused Again as White House Mulls Executive Action?
Explore: Equifax, Experian and TransUnion to Clear Billions in Medical Debt From Credit Reports This Summer

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Having one bill to pay, instead of several, can offer a psychological boost and help you feel more in control of your debt. Plus, the money you save on interest charges can go directly toward paying off your high-interest credit cards and loans.

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About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.
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