The best way to improve your debt management efforts is to implement a repayment strategy. Putting extra money towards debts randomly or only making minimum payments will just keep you in debt indefinitely. Identifying financial goals or milestones and creating a plan to achieve them will speed up the repayment process. Let’s look at the benefits of some recommended strategies.
Why Use a Repayment Strategy?
If you’ve got multiple debts, no matter the types or amounts, having a repayment strategy in place for paying them back increases your chances of success. A dedicated plan will focus your efforts and speed up the process. Even just looking into which strategy is best for you will help you gain a better understanding of your debts and how to go about repaying them.
Do It Yourself Strategies
If you want to eliminate debt without assistance, you’ll need an effective budget and the willpower to put any money leftover after paying bills toward your debts. Here are two common methods to choose from for those repaying debts on their own.
- Snowball Method: Put the most money toward paying off the debt with the lowest balance first. This method helps build momentum by focusing your efforts on the debt that is easiest to eliminate. This method is beneficial because it automatically sets incremental goals of paying off one balance after another. Paying debt is often a mental struggle. Snowballing allows you to quickly see some progress that can keep you on track toward becoming debt free.
- Avalanche Method: Put the most money toward paying down debt with the highest interest rates first. This method will save you the most money in interest charges over time. It is not as easy to see and feel that progress is being made, so it can be more challenging than the snowball method. However, since it cuts into the interest charges, it is the quickest debt reduction plan you can pursue on your own.
NOTE: With either strategy, you must continue to make at least minimum payments to all accounts. This will keep you current and help avoid late fees and other penalties.
Repayment Strategy Assistance
If you are struggling to budget effectively or simply aren’t making headway on your debts, it may be time to seek professional help. Finding debt relief help is difficult since many options are not effective, and some companies are not trustworthy.
A good first step is to speak with a certified credit counselor. These financial professionals will assess your complete financial situation in order to make strategy recommendations. Most agencies will offer a counseling session for free over the phone. A counseling session can help with budgeting and with understanding your best options. Be sure to use a nonprofit credit counseling service. For-profit companies may charge excessive fees or suggest unnecessary services they can charge you for.
Be sure to thoroughly research any debt repayment strategy or company you might use to manage debt. This is critical for preventing a misstep that could cost you down the road.
To speak with a certified credit counselor today, call ACCC at 1-800-769-3571.