5 Ways to Repay Debt
When it comes to managing debt, there are many strategies you can use to get back on track. Each method has its own advantages, and understanding your options will help you choose the one that’s best for you. Here are five ways to get started.
1. The Snowball Method
The Snowball Method is a popular strategy that focuses the smallest debt first, regardless of the loan's interest rate. Once the smallest debt is paid off, you move on to the next smallest debt, and so on, until all debts have been repaid.
How to Get Started
- List your debts from smallest to largest
- Then, each month, make the minimum payment on all your debts
- Next, take any extra money you have and make a payment toward the smallest debt
- Once the smallest debt is paid off, move on to the next smallest one
With this approach, you’ll see loans disappear from your monthly budget quickly, creating a series of wins along the way.
2. The Avalanche Method
The Avalanche Method focuses on repaying loans with high interest rates first. While it may take longer to completely repay your first loan, you’ll ultimately pay less in interest.
How to Get Started
- Determine which of your loans have the highest interest rate
Check your statement or call your lender for help. - Then, make the minimum payment on all your debts
- Next, take any extra money you have and make a payment towards the debt with the highest interest rate
- Repeat that process until the loan with the highest rate is repaid. Then move on to the loan with the next-highest interest rate.
If you’re comfortable waiting to see the results of your hard work, this method can be a great way to save on interest costs.
3. Debt Consolidation
With debt consolidation, you’ll combine all your debts into one easy payment. Instead of juggling lots of bills, you’ll make one payment each month. This can make managing your monthly budget simpler, and less stressful.
How to Get Started
- Research low-interest debt consolidation loans, and apply for the full amount you need
- If approved, you’ll receive money to start paying off your debt
- Then, you’ll make monthly payments on the debt consolidation loan until it’s repaid
Debt consolidation can help turn credit card debt and other loans into a single payment that’s easier to manage. And if you’re approved for a debt consolidation loan with a lower rate than your current debts, it can even help lower your monthly payment. If you’re interested in debt consolidation, we can help. Send us a chat, call 800.856.7328 or visit your local branch to get started.
4. Leveraging Current Assets
This strategy involves selling, or taking a loan against, your assets to repay debt. Assets are things you already own, like a car, jewelry or equipment. In some cases, this strategy can be used for debt consolidation, since it can help you repay several smaller debts in one go.
How to Get Started
- Make a list of the valuable things you own that you could sell or take out a loan against, like a car or RV that you no longer use
- Then, sell the items or take out a loan against them
- Next, use the money from the sale or loan to pay off your debt
You can also use savings or investments, if available, as a source of funds to repay your debt.
With this method, you’ll have immediate cash to repay your debt, which can be helpful if you need to act quickly. And if you take out a loan against an asset like a car or boat, you may find that the rate is lower than that of your outstanding debt. This can lower your monthly payment and save you money.
5. Balance Transfers
When you make a balance transfer, you move debt from one credit card to another with a lower interest rate. This helps you to pay down the balance without gaining as much interest, making it easier to get out of debt faster.
How to Get Started
- Research low-interest cards and apply for the one that fits you best
Look for cards with no balance transfer fee, like a Rogue Visa® credit card - Transfer the amount you need from the new card to pay off the high-interest card
- Then make regular payments on your new credit card
While there are many strategies that can help you repay debt, the right one depends on your goals. Whether you choose the snowball method for motivation, use debt consolidation to simplify your payments, or do something else, the key is to stay on track. After all, there’s no wrong way to repay debt, as long as you get started!
