It’s hard to go through life without ever acquiring debt, whether it’s for a car, a home or simple everyday expenses. But sometimes it can feel like it’s getting out of control, especially if our circumstances change or the cost of living suddenly rises. Don’t worry, finding the right debt repayment strategy will help you whittle down what you owe until you’re completely debt free.

3 steps to start paying down debt

Before you can crack down on your debt, you first need to get a firm grasp on where you stand. So let’s start by crunching some numbers:

Step 1: Make a debt master list

Seeing your debt all laid out can be daunting. But having those numbers in front of you will help you figure out exactly what you’re working with and the best repayment strategy to use. Make sure you include exact figures, as well as interest rates and current monthly payments.

Step 2: Create a budget

If you don’t already have one, now is the time to create a budget. It doesn’t have to be complex. There are lots of budgeting methods to try, from simple to detailed. Whichever type you choose, it will help you understand your spending and spot potential savings you can put towards getting debt free.

Step 3: Determine a monthly debt payment

Now you’ve got a better understanding of your debt and expenses. From there, you’ll be able to decide how much money you can commit to paying down debt each month. Just make sure the amount is sustainable for you.

The powerful repayment strategies you can use to get debt free

Not all repayment strategies make sense for everyone. The best approach for you will depend on the type of debt you carry, how much you owe, and your money personality. Here are three key strategies to explore.

1. The debt snowball

Great if: you need the motivation of quick wins to stick with your plan.

With this method, you focus on paying off your smallest debt first – even if another debt charges higher interest. That means, to start, you put most of your $600 monthly repayment towards Credit Card A, while paying the minimums on the other two debts.

When Credit Card A is paid off, you take all the money you’ve been using to pay it down and add it to the minimum payment on the next smallest debt (Credit Card B). With each debt you eliminate, the amount you put towards the next debt grows – much like a snowball rolling downhill.

The beauty of this method is that you see success quickly. Credit Card A is paid off completely in 4 months, giving you a sense of accomplishment that encourages you to keep going.

2. The debt avalanche

Great if: saving on interest is your priority.

Like the debt snowball, the debt avalanche encourages you to focus on paying off one debt at a time, with minimum payments to the rest. But rather than prioritizing your smallest debt, it focuses on eliminating your highest-interest debt first.

That means you’ll start by putting most of your $600 repayment towards Credit Card B, followed by a growing amount to Credit Card A and then finally the full $600 towards your Line of Credit.

The benefit of this method is that you’ll likely save on interest by eliminating your costliest debt first. However, you may have to wait longer to celebrate paying off your first debt.

3. Debt consolidation

Great if: you carry a lot of high interest debt and can’t afford to increase your payments.

Debt consolidation uses a single loan to pay off multiple debts, combining them into one, more manageable payment. You may pay more in interest with this method than the other two, but if you can’t afford to increase your payments the way the snowball and avalanche require, debt consolidation is a good option to explore.

The key is to ensure your new loan’s interest rate is lower than the combined rate you pay on your other debts. Using our example, it would be 14%. That’s why this method is typically best for high interest debt like credit cards.

Carrying multiple debts can be understandably overwhelming. With different payments, interest rates and due dates to juggle, it’s stressful trying to pay it all off. But you don’t have to figure things out alone. Our lending and wealth advisors have the experience to help you assess your options and pinpoint the right repayment strategy to get you debt free.