Rapid Debt Repayment Plan - According to Mary Hunt
Mary Hunt has a great debt repayment program. It is called the Rapid Debt Repayment Plan. In her book Debt-Proof Your Marriage, Hunt explains all about this plan. She provides all the details needed to get started and to succeed in repaying all of your debt.
The first step of course is to list all of your debts. Mary Hunt instructs you to list them based on the type of debt and the length of the payoff term. Unsecured loans are listed first, the shortest term down to the longest term. So if you have five credit cards and one could be paid off in five months, one in two years, one in four months, one in one year and one in three years, you would pay off the four month one first, then the five month, then the one year, two year and three year credit cards after that. She knows that seeing a balance get to zero and having a credit card paid in full provides a ton of motivation to stick with the plan. Your shortest term might not have the highest interest rate, but you should still pay it off first.
Next to each item on your list you need to have the minimum payment listed. Hunt says that the beauty of the program is that you don't ever have to pay more than the minimum payments of all debt combined - ever. She says that when one debt is repaid you add that minimum payment to the next minimum payment to pay off that debt much quicker. By continuing to pay your debts in this manner, paying the same amount each month, regardless of how many debts you have left or what the minimum payment is you should be out of debt quickly.
The problem that I have with this plan is that Hunt does not encourage someone to pay more than the minimum payments. I see this as a problem, because it could take a very long time to payoff that first loan, if you are only paying the minimum payment towards it. If it is a substantial loan, it could take years to payoff the first loan on your list. The one thing I would do differently is encourage everyone to try to send as much money as possible to the loan they are trying to payoff first, while continuing to pay the minimums on everything else. Every little bit that you can send in towards the principal of the loan will drastically reduce the amount of interest you pay between now and when the loan is paid off. Especially if it is going to take you awhile. To help you figure out exactly how long it should take there are plenty of good financial calculators online.
Mary Hunt has some rules to her debt repayment plan. The first one is no new debt - of any kind. I definitely agree with this - for any debt repayment plan - or for anyone in general. One of the keys to getting on better financial ground and out of debt is to accumulate no new debt. You should commit to this - to yourself and to your spouse or significant other if you have one.
Hunt's second rule of her Rapid Debt Repayment Plan is to pay the same amount each month towards your debt. Regardless of how many loans you have to pay or what the total of your minimum payments are now, you are to pay the exact same amount as you were paying when you started. Adding the minimums of the debts already repaid to the minimum of the debt you are working on right now. While I do think this is a great idea, I also advocate paying extra when you can. I think that you should make it your goal to add extra each month towards your debt repayment to get out of debt even quicker.
Rule number three is to arrange your debts so that the one with the shortest payoff is at the top of the list and the one with the longest payoff is at the bottom of the list. Again, this gives you an emotional lift and motivation to continue the plan.
Rule number four states that as a debt is paid off you add that minimum payment to the next debt on the list - therefore paying down the principal of that loan much quicker. This works great as you move on down the list. By the time you reach the last debt you are really going to have a good chunk of money to put towards that debt each month. It is the first couple of debts that I worry about. The ones that you hardly have anything going towards the principal. By adding as much extra as possible you will really get the ball rolling in your debt repayment plan. But make sure you always add the minimums of the ones you have paid off to the one you are working on now.
So while I really like Mary Hunt's Rapid Debt Repayment Plan, I do see some flaws. Or should I say things that could be done better. I see places in her examples throughout the book that could definitely be improved - all to help you get out of debt quicker. Hunt's ideas are great and her plan should work very well for most people. I just think that by adding more than the minimums each month to your debt is a smarter way to go. So if you are trying to get out of debt Hunt's Rapid Debt Repayment Plan is a great way to do it! And her book Debt-Proof Living is a great tool to use to help.
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