There comes a time in many borrowers’ lives when they realize what making minimum payments on their debt does to their balance. Or, more accurately, what it doesn’t do.
That’s what happened to Kyle of Dollar Diligence. After six years of making automatic minimum payments on his student loans, it hit him: he had made almost no progress on paying off his loans.
When he first realized what happened, he was angry with himself. He thought he should have done something sooner. Then he decided to act and kick his student loan repayment into high gear.
Here’s how one man woke up from the hibernation of automatic minimum payments and destroyed his student loans in less than two years.
Paying the minimum and going nowhere
When Kyle graduated from college he had more pressing concerns than paying off his student loans right away. He went to graduate school, became a teacher, went out with friends, and enjoyed life.
For years he kept up with his minimum student loan payments, never knowing they weren’t helping him get anywhere close to paying off his debt.
Kyle figured that doing his part and making his payments – even automating them so he’d never miss one – would eventually lead him to debt payoff. Eventually being the operative word.
That’s why he felt so much anger the day he realized that he’d made almost no progress on his overall payoff. Where had all those payments been going? And when would he actually be debt-free?
The anger and frustration that ensued were all Kyle needed to make his student loan repayment a top priority.
Approaching debt payoff with ‘gazelle intensity’
First Kyle started following Dave Ramsey’s advice on debt repayment strategies. Then he sent extra money from side gigs, such as teaching driver’s education, straight to his loans.
Kyle even whittled his food budget down to $100 per month, and lived in his sister’s basement and with roommates for awhile. All to attack his student loan payments with “gazelle intensity.”
Gazelle intensity is a phrase coined by Ramsey:
So the way you get out of debt is you run like you are a gazelle with a cheetah chasing you. […] When you do that and you have that kind of intensity in getting out of debt, you can break the gravitational pull of stupid and move yourself in a better direction.
The good news is gazelle intensity doesn’t always have to be forever. You could try it for a few months to boost your payoff or during your full repayment time to get to the end as quickly as possible.
For Kyle, it was all gazelle intensity until that debt amount hit zero. And it worked.
The combined effort of cutting expenses and earning extra money enabled Kyle to pay an extra $1,000 to $1,500 per month on his student loans. That’s how Kyle paid off his remaining debt – a whopping $33,000 – in only 18 months.
But the key for Kyle was getting organized and understanding where his money was going so he could find new ways to cut back.
Think you couldn’t possibly cut back more? Take another look at your spending from the past few months. It might surprise you when you learn where some of your money is going.
After conquering debt, you can do anything
Since he hit that magical number zero, Kyle’s been busy.
“I’ve saved a full six-month emergency fund, saved up to pay cash for a used car, saved for a wedding and honeymoon,” Kyle says. “My next large purchase will likely be a home, so I have a lot of saving to do.”
Now that Kyle is completely debt-free, he feels like he can accomplish pretty much whatever he wants.
“With the habits I developed during my debt payoff, truly no financial goal is too large in my opinion,” Kyle explains. “It’s amazing what you can do if you have a goal and a plan.”
And that’s what can happen when you knock out a goal that feels insurmountable at times. All it takes is a few changes, some momentum, and then the sky is the limit.
Wake up and fight back against minimum payments
Minimum payments are set up to keep us in debt for as long as possible. After all, the longer we’re in debt, the more interest lenders make.
Perhaps you can only afford to pay minimum payments so you can make ends meet. But if you can find a way to cut back or earn extra money and apply that to your payments you can shave months or even years off your debt payoff.
If you think that sounds crazy, check out our prepayment calculator below to see what paying a little more can do.
Student Loan Prepayment Calculator
Sometimes all we need is extra focus and a push out of our comfort zones to achieve our goals. Look what it did for Kyle! Living with gazelle intensity took him from another few years of debt repayment down to no debt in just 18 months. That’s less than two years of hard work for Kyle to now wake up every day and think, “I’m debt-free.”
Are you ready to do what it takes to be able to say the same thing?
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