If you have debt, you’re not alone. The average American carries more than $100,000 in debt.1 That existing debt load means unexpected expenses such as medical bills can be a tipping point into financial insecurity.2And if you have too many payments every month, you might get behind on other financial goals such as building an emergency fund, taking a vacation, or adding to a retirement account.
One place to start? Try to make progress every month on reducing your debt. It takes a little organization up front, plus a strategy that fits your budget and your preferences. These steps can help—including three specific, practical strategies to pay down or pay off your debt:
Make a list of all your debt.
Before you start paying off debt, tally how much debt you have. Make a list with this information for each bill you owe.
Trim from “wants” and a little from “needs” (i.e., a lower streaming bill) to come up with the total you can put toward debt repayment each month.
What’s the best way to pay off debt?
You can choose a debt repayment plan tailored to your unique circ*mstances— what’s best for you. In general, there are three strategies that can help you pay down or pay off your debt more efficiently.
What it’s called
How it works
How you keep it going
Why some people like it
1. The snowball method
Pay the smallest debt as fast as possible. Pay minimums on all other debt.
Then pay that extra toward the next largest debt.
A quick payoff is a quick win and can be a confidence booster.
2. Debt avalanche
Pay the largest or highest interest rate debt as fast as possible. Pay minimums on all other debt.
Then pay that extra toward the next smallest debt.
Paying off a big debt can boost a feeling of control and gets rid of big interest, too.
3. Debt consolidation
Combine debts into a single account.
Avoid any other debt until post-payoff
Possible lower interest and one account increases focus.
Celebrate success and stay on top of future debt.
Sometimes debt can be good to help you build a credit score or accomplish goals—such as buying a house—that would be hard to do without a loan. But lots of extra debt can weigh down your credit score and add up to interest you didn’t want to pay. So celebrate every extra payment—and every debt payoff, too.
What's next?
As you manage your debt, talk to a financial professional about your long-term retirement savings strategy. If don’t already have a financial professional, we can help you find one.
This involves starting with your smallest balance first, paying that off and then rolling that same payment towards the next smallest balance as you work your way up to the largest balance. This method can help you build momentum as each balance is paid off.
This involves starting with your smallest balance first, paying that off and then rolling that same payment towards the next smallest balance as you work your way up to the largest balance. This method can help you build momentum as each balance is paid off.
First, list the debts you want to pay down in order of their balances, from smallest to largest. Pay all the minimum payments. Then, put any extra money toward the smallest debt. After the smallest debt has been paid off, put your extra money toward the next smallest debt.
This includes mortgages, home equity revolving debt, auto loans, credit cards, student loans and other consumer lending such as retail cards. The total household debt of $17.3 trillion entering 2024 is a new high for the U.S.
A: Request a clearance certificate from your debt counsellor and submit it to the credit bureau. The credit bureau will then remove the debt review status from your credit report.
Introduction: My name is Terrell Hackett, I am a gleaming, brainy, courageous, helpful, healthy, cooperative, graceful person who loves writing and wants to share my knowledge and understanding with you.
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