Debt Repayment Plan

1. Understand Your Debt Landscape

• List All Debts: Gather details for each account – remaining balance, monthly payment, interest rate, and any fees. This provides a clear picture of what you're up against.
• Check Your Credit Report: Obtain your free credit report from AnnualCreditReport.com to get a comprehensive snapshot of your outstanding debt and verify accuracy.

2. Choose a Repayment Strategy

No single solution fits all. Pick a method that aligns with your motivation and financial situation.

• Debt Avalanche Method: Prioritize debts by highest interest rate. Pay as much as possible on the highest-interest debt, while making minimum payments on others. This saves the most money on interest over time. Learn more
• Debt Snowball Method: Prioritize debts by smallest balance. Pay as much as possible on the smallest debt, then roll that payment into the next smallest. This provides quick wins and motivation. Learn more
• Debt Consolidation: Combine multiple debts into a single payment, often with a potentially lower interest rate. Options include balance transfer credit cards or debt consolidation loans. This simplifies management. Learn more

3. Develop a Workable Budget

• Create a Monthly Budget: Track your income and expenses to understand where your money goes. Categorize spending as mandatory or discretionary. Guide to budgeting
• Allocate Funds for Debt: Once essential expenses are covered, determine how much discretionary income you can commit to debt repayment beyond minimums.
• Stop New Borrowing: A crucial first step to reducing debt is to stop incurring new debt.

4. Accelerate Your Payoff

• Pay More Than the Minimum: Even small extra payments can significantly reduce the total interest paid and accelerate your payoff date. Tips for increasing payments
• Establish an Emergency Fund: Build a savings cushion to prevent new debt from unexpected expenses. Aim for a few months' worth of living expenses. Emergency fund guide
• Save on Interest: Explore balance transfer credit cards with 0% intro APR or personal loans with lower interest rates to consolidate and save.

5. Stay Accountable & Celebrate Progress

• Monitor Your Progress: Regularly review your debt balances and credit reports to see your efforts pay off.
• Set Milestones & Rewards: Celebrate small wins to stay motivated. Recruit a friend or partner for accountability.
• Communicate with Creditors: If you foresee payment difficulties, contact your lenders proactively to discuss options.