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Other Methods of Repaying Debt
It may be worth exploring all of your options before committing to a debt repayment strategy. Here is a brief overview of a few other methods that could help you pay off your debts.
Read more: How to pay off a debt
Avalanche of debt
The Debt Avalanche Method helps you get rid of your debt while paying as little interest as possible. It does this by prioritizing your high-interest debt. Using the debt avalanche method is very similar to the snowball method in execution, but it takes a different approach to organizing your debts. Here are the basic steps:
- Classify your debts by interest rate.
- Make your minimum payment for each debt.
- Put all the extra funds to pay off the debt with the highest interest rate.
- Once a debt is paid off, transfer that payment amount to the next debt on the list.
- Repeat until you have paid off all your debts.
Although the avalanche method can save you money on interest charges, it can be more difficult to maintain motivation throughout the process than if you use the snowball method. For example, if your highest interest debt is also your largest debt, it may be months or years before you pay off any of your debts.
Read more: What is the debt avalanche method?
If, like many people, you don’t like juggling multiple payments, debt consolidation can be a good strategy. Essentially, consolidation is using one large loan or line of credit to pay off multiple debts. The advantages of consolidation can be twofold:
- You only have to make one debt payment, instead of several.
- If you can consolidate at a lower interest rate, you save on interest charges.
Debt consolidation is easier if you have a good credit rating, as you must qualify for a credit card or loan. However, there are several ways to consolidate your debts. Here are some common methods:
Each strategy has its pros and cons, so it’s best to research each one thoroughly before coming up with a plan. Our debt consolidation guide is a good place to start.
Debt management plan
Sometimes the best way to solve a problem is to consult a professional. You can find a number of nonprofit credit counseling agencies that can help you develop a debt management plan.
Debt management plans usually involve working directly with your creditors to develop a debt repayment strategy. This could include setting up a structured payment plan and/or lowering your interest rates to lower your monthly payments.
debt repayment apps
Sometimes what you really need is a good tool like our Debt Snowball Calculator – or a suite of tools. In the digital age, you can find many useful financial tools right in your pocket with a quality mobile app.
Our best debt repayment apps offer a variety of resources to help you organize your debt and save money. You can also set budgets, track expenses, and access educational materials to improve your personal finance knowledge.