Tips for Paying Down/Off Debt

Paying Off Debt > Tips for Paying Down/Off Debt

August 6, 2021
paying_off_debt

Debt can sometimes feel overwhelming, especially when its spread out over multiple different accounts and cards. There are a lot of reasons debt occurs, such as medical emergencies, loss of a job, unforeseen expenses and more. Regardless of the reason you’re in debt, there are simple strategies you can follow to work towards getting out of it.

First and foremost, it’s important to identify the total amount of debt you have. Knowing exactly how much debt you have is the first step in working towards paying it off. Compile a list of all loan and credit debt along with your monthly budget to visualize what you owe. You will want to include all the details in your list, such as the due date for each payment and the minimum due each month. Once you understand exactly what you owe, you can make a realistic repayment plan.

There are two main strategies on repaying debt. One strategy is called the debt snowball. This is where you focus on repaying the smallest debt first while maintaining the minimum payments on all other debts. As you pay off the smaller amounts, that money is then put towards the next debt to be paid off, therefore creating the snowball effect. The second strategy is called the debt avalanche, which is the smartest economical option. Instead of focusing on the smallest balance, the avalanche focuses on paying off the debt with the highest interest rate first. After the most expensive debt is paid off, you can then focus on the amount with the second highest rate and continue until all debts are gone.

There’s no secret to paying off debt and saving money. It just requires a plan and the discipline to stick to it. Once you reach your goal, it is important to stay on track and keep your spending controlled so you don’t end up in the same spot as before.

If you’re in need of financial products and services to help you reach your financial goals, contact PCT Federal Credit Union today.