It might sound impossible, but you can actually pay off your debit more quickly without increasing the amount you pay per month. The best part? You will actually pay less over the life of your loans. This is method is known as “snowballing”, and it could save you thousands of dollars in interest!
Here's the basic idea: Once you pay off your first loan, you take the money each month that originally paid that loan and apply it to your second loan. Once you pay off the second loan, you apply those funds to the third loan, and so on (see graph below).
By doing this, you pay off the loans more quickly than you would if you made the minimum payments, all without disrupting your monthly budget.
Meet John Doe. John has a mortgage, vehicle loan, and credit card for a total debt of $104,266. His monthly payments add up to $957.96 (if he makes the minimum credit card payment). If John was to stop using his credit card and make exact payments on all of his debts, he would pay off that debt in the mid-2031.
However, if John was to snowball his debts, he would be debt-free almost 6 months early and save over $6,000 in interest! I'm sure John would rather spend that $6,000 on something else...wouldn't you?