You have financial goals for the future.
It’s okay if your debts make those goals feel daunting.
You can consistently make progress by taking one small step, then another. By having a bias towards action, you’ll take control of your financial outcomes. Let’s take a look at how.
Start with the basics
Surprisingly enough, the first step to paying off debt isn’t making a payment—it’s managing your budget. Making the most of each dollar that comes in, and each dollar that goes out, will help you understand your ability to repay. That act of deliberate budgeting will help you stay focused on your goal and help you avoid more debt.
Know your debt strategy
Paying off debt is a financial commitment. It’s also psychological. Not only do you need the cash to pay, you also need a method that makes sense for your lifestyle and goals. Here are two commonly used methods that you can consider:
- Debt avalanche method: For when you want to save the most money. With this method, you pay off the highest interest rate debt first, while making minimum payments on all other debts. By paying the highest interest debt first, you will lower the overall amount of interest you have to pay. Once the debt with the highest interest rate is paid off, you put the money from that payment towards the next debt with the highest interest rate until all debts are paid off.1
- Debt snowball method: For when you want to score a quick win to keep you motivated. With this method, you make minimum payments on all your debts and put extra money toward the smallest debt balance. Once that debt is paid off fully, you put the money from that payment towards the next smallest debt balance until all your debts are paid off.2
Consider other options
Paying down debt can seem like a big hurdle. In the event you have a lot of debt, you may consider other strategies, such as:
- Debt refinancing: Debt refinancing is when you pay off existing debt with new debt that has more favorable terms, like a lower interest rate. Consider repayment periods and prepayment penalties.3
- Debt consolidation: Debt consolidation rolls multiple debts, typically high-interest debt such as credit card bills, into a single payment. This could simplify debt repayment and potentially lower payment amounts if you can secure a consolidated loan with a lower interest rate.4
Small steps, deliberately taken
We know that debts can feel scary.
But by taking one small step to repay now, and then another, you’ll build the confidence you need to succeed. We believe in you.