Oh, Debt. In the moment it is so helpful: It can help you get an education, feed your family, and enjoy the little things for just a moment. Then, it piles higher and higher until it paralyzes you. It’s not healthy. But you already know that, so let’s get straight into the strategies you can use to get out of debt.
I’ve compiled five strategies that you can use to repay your debt. You can choose one or a combination of them all. I’ll write about the benefits of each method to help you decide what fits best for your situation.
Get out of debt with these 5 repayment strategies
1. Contact your creditor
Talking to your creditor should be your first step to get out of debt. They have the power to lower your payments or lower your interest rate to make it easier to pay your loans. After you negotiate the terms of your loan, you can move on to the next strategies to get out of debt faster.
2. Consolidate your debt
Consolidating all of your credit cards into one personal loan is an excellent debt repayment strategy. The benefits of consolidation are a reduced number of bills and a lower interest rate on your combined debt. Consolidating can also protect your credit score as you pay off your debts into a new loan.
We once got a debt consolidation loan as the first step to repay our debts. It was such a relief to completely pay off many high-interest credit cards at once as they were rolled into a new, lower-interest loan. We were able to knock out all of the debt that was a higher interest rate than the one of the new loan.
My very favorite resource for personal loans is SoFi! Get your rate for a consolidation loan from SoFi here!
If you still have a few other debts outside of your debt consolidation loan, then definitely read on to learn how the next three strategies can help you get out of debt once and for all.
3. Biweekly Method
4. Snowball Method
If you’ve been working on paying off debt, you’ve probably heard of this strategy. Here’s how it works: First, allocate money in your budget toward debt repayment every month. Next, organize your debts by balance, from lowest to highest. Of the amount you’ve budgeted, you first make all of your minimum payments. Then, you put what’s left over toward your lowest balance debt. As you do this, you’ll be able to completely pay off your lowest balances and snowball your money into the next lowest balance debt.
The benefits of using the snowball method to get out of debt are that you are able to quickly reduce your number of bills and maintain confidence in your debt repayment strategy with the momentum that comes from completely knocking out some debts.
One problem with this method is that some of your highest balances may also be your highest interest rates. You may end up paying a lot of money in interest. Don’t worry though, the last debt repayment strategy on this list is designed to combat that problem head-on.
5. Ladder Method
This last strategy is very similar to the snowball method. Instead of organizing your debts by balance, organize them by the interest rate. Then, start by putting the extra funds you’ve set aside toward your highest balance debts. This strategy will not reduce your total number of bills as quickly as the snowball method, but it will save you the most money in interest!
Put it all together
The beauty of debt repayment is that you’re in charge! You don’t have to be bound by the rules of any single repayment method. You can mix and match any of the strategies to create a plan to get out of debt that works for you.
For example, you can start by contacting your creditors to renegotiate the terms of your loans. Then, get a debt consolidation loan to pay off the debts of the creditors that didn’t work with you. After that, you get set up all of your minimum payments according to the biweekly method. Then, snowball your way through your lowest balances AND climb down the ladder to knock out your highest interest rates.
As you put it all together, you can get out of debt in no time!
BONUS! Find ways to make extra money specifically for debt repayment.
These awesome strategies to repay your debt do not work unless you have money just for debt repayment. If your budget only allows you to make your minimum payments, then you can find ways to make extra money to get out debt faster. You could get paid to take surveys, drive for Uber, or start a blog. You could also grow your money by investing. There are endless opportunities to side hustle your way to more income!