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how to pay off debt

How to Pay Off Debt

Conquer your student debt. Refinance now.

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Living with debt is a reality for most Americans. In fact, the average household in the United States had credit card balances totaling $16,748 in 2016, according to a NerdWallet report. While debt comes about in many ways—unexpected bills, education, housing costs, lifestyle creep—living with it doesn’t have to be your new normal. You can get out of debt.

Whether you have $5,000 or $50,000 in debt, with careful planning and consistent payments, you can make a move pay it off and move on to more enriching goals, like saving for a vacation or even a house. Here are some ideas on how to strategize getting all your debt under control.

Read more: Paying Off Student Loans? Try the 20% Rule

Step 1: Make an Inventory of Your Debt

In order to create a plan to tackle it all, you need to understand what it is that you’re paying. The first step is to gather up all your loan documents—student loans, all your credit cards, personal loans, any outstanding bills, etc.,—in one place and take a good look at them.

You’ll want to inventory all your debts and information on each, including:

  • The actual amount you owe
  • Each payment amount, including frequency of payment (bi-monthly, monthly, quarterly, or annually)
  • How many payments you have left
  • The interest rate and type (fixed or variable). If it’s a variable rate, indicate what the rate is based on
  • Due dates for each payment

You should be able to find out all of the above using your most recent statements.

If not, look through your loan documents or check the terms you agreed to on the original loan statement. You can also try calling the lender or credit card company to check your account details.  

Getting your credit report is also another way to find out what outstanding loans you have. You’re entitled to free reports from each of the three major reporting bureaus each year from These reports will show you a list of all the debts you owe, except for ones from family and friends. If there are any discrepancies in the report, make sure to report it.

Read more: How to Read Your Credit Report

Step 2: Refinance Loans if Possible and Prioritize Debt 

Consider what loans are eligible for refinancing. For example, can you reduce your rate on your student loans? With other debt, would it make sense to refinance your credit card or medical bills with a personal loan? Refinancing works best for those who have current income and a track record of financial responsibility. Refinancing can also help you consolidate loans so you have fewer payments to keep track of each month.

Read more: When It Makes Sense to Refinance Your Credit Card Debt

If you cannot refinance any your debt, don’t worry. You can still tackle your debt effectively and you’ll need to learn what types of debt to prioritize. Take a look at the list you created with all your debt and reorder them from highest APR to lowest.

If you have any debt in collections, put those bills at the top as these will keep your credit score down. If you’re seriously behind on debt payments and simply cannot make your payments, don’t panic—you can get help with a credit counseling organization.

Now, your next step is deciding which method you want to pay off your debts.

Step 3: Strategize Your Debt Pay Off: Snowball or Avalanche

There are several strategies to pay off debt, and you’ll have to decide for yourself what makes the most sense.

If you’re just looking at debt from a purely numerical point of view, the avalanche method could help you pay back all your debts in the shortest amount of time. This method requires you to pay the minimum payments for each loan, then put any extra money towards the loan with the highest interest. Once that loan is paid off, you then tackle the loan with the next highest interest loan and keep going like that until all of them are paid off. This method ensures you pay less interest overall over time.

However, if a little motivation will help you stay on track to keep paying off debt, you might find the snowball method works better. Research has shown that over time this method has the best success in helping people get out of debt compared to paying bills randomly.

Unlike the avalanche method, you focus on the smallest loans, paying more than the minimum amount due. This means you’re paying off your debts from smallest to largest. The idea here is that you work on short-term victories and that seeing one loan paid off will inspire you to keep going. 

No matter what method you choose, the important thing is that you’re taking proactive steps to pay off your debt. Remember, the most important part of getting out of debt is not adding more debt to it. Good luck!

Read more: The Importance of Making On-Time Payments.

Conquer your student debt. Refinance now.

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Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.