If you are looking to build plans to pay off debt, you're in the right place! I'm going to be sharing a few different options to pay off your debt so you can have a solid plan that is to help you hit your debt pay-off goals faster!
The first step is to know your debt numbers! Collect the info below for each debt:
Who the debt is owed to
What your current balance is
What your interest rate is
How much your payment is
Payment dates
Now let's talk about the different strategies to tackle your debt! I'm going to share four different options. You may find that one will work best for you for your whole debt pay-off journey, or you may want to start with one, and then move to another after you knock out a debt or two. It's up to you because you know yourself best!
For all of the strategies below it's important for you to:
Make minimum payments on all of your debts - this will help your credit score and prevent any debts from going into collections or having interest rates increased (which some credit card companies do if you miss payments).
Focus all additional debt payments based on the strategies below.
When you pay off a debt, don't forget to celebrate!
Create an overall budget for your money if you haven't yet because it can help you hit your debt pay-off goals faster!
Debt Snowball - with this method additional debt payments go to the debt with the lowest balance. Once you pay off your debt with the lowest balance you move on to the debt with the next lowest balance. The snowball part comes in because you take any money that was going toward your first debt and roll it into the debt you are currently making extra payments on. This method is great if you have one or more debts that have a smaller balance because as you pay them off, it can help keep you excited about the process!
Debt Avalanche - this method is focused on minimizing the interest that you pay by focusing extra payments toward your debt with the highest interest rate. This can be very effective if you have one or more debts that have a significant interest rate like a payday loan.
Emotional Method - if one (or more) of your debts brings up negative emotions this could be where you start. Debts related to divorce or other highly emotional events, and debt to loved ones can feel extra emotional to be carrying. Tackling any emotional debts first can help relieve some of your financial stress. While it might mean higher-interest debt waits a little longer, taking care of highly emotional debts pays off in many other ways!
Highest Payment Method - with this method, you start by putting extra debt payments towards your debt with the highest payment each month. This can be a great method to use if you have one or more debts with high monthly payments that are making cash flow tight. If the balance of your debt with the highest payment is high, it could mean that it takes a good chunk of time to pay off your first debt.
When working to pay off your debt, be patient with yourself, and take a few minutes to celebrate your wins both big and small!