Debt Repayment Strategies To Consider

 Debt Repayment Strategies To Consider

The average American household owes more than $15,000 in credit card debt. When your expenses keep piling up, and you’re not making enough to cover all of them, sometimes it feels like there’s no way out. Unfortunately, when it comes to debt repayment, there is no one-size-fits-all approach. Different types of debt require different strategies, and what works for your friend may not work for you. However, here are some debt repayment strategies that can help pay down your debt:

  1. Snowball Method

When coming up with a plan, the first thing to do is figure out how much you owe and which debts need to be paid off first. If you have balances on several credit cards that charge different interest rates, the snowball method will help prioritize them according to their APRs (annual percentage rates), not their balances. The snowball method assigns each credit card order of difficulty based on APR, starting with the highest rate and working your way down. Start by making the minimum payment on every credit card until you’ve paid off the one with the highest APR, then apply that payment to your next bill. Once that balance is paid in full, you move onto the card with the second-highest APR and so on until all your cards are paid off.

  • Debt Avalanche Method

With this method, you start paying back debts starting with the lowest balance first and working your way up to those with higher balances. The advantage of prioritizing according to balance is that it results in a lower total amount of interest paid overtime, but some people may have trouble sticking to such a rigid plan or have extra money at the end of a pay period they would like to apply debt.

  • Balance Transfer Credit Cards

If you’re carrying balances on several high-interest credit cards, applying for a balance transfer credit card can help you pay off your debt faster and save money on interest in the long run. With the average American household currently facing $16,883 in credit card debt as of May 2018, according to NerdWallet’s latest report, transferring that balance from a high-interest credit card to a low or no-interest one is a smart way to minimize spending on interest fees and maximize monthly payment amounts toward principal. The issuer will typically charge between 3% and 5% of the amount transferred as a fee. So be sure to factor that expense into your borrowing decision, but it may still make sense if the interest rate on the new card is over 25% lower than what you’re currently paying.

  • Debt Management Plan

If your total debt is more than 60% of your gross income, or if you have stopped receiving collections calls but are unable to pay off all your balances within 36 months, some creditors may offer a debt management plan whereby they allow you to pay back your debt over time with reduced interest rates and without penalty fees. However, to be eligible for this kind of program, you cannot have filed for bankruptcy in the past seven years. These plans typically last for between 36 and 60 months, and there is an upfront enrollment fee of around $50 plus a monthly fee of roughly $35 per month after the first three months. It is not the best option if you’re looking to get out of debt quickly, but it may be right for some depending on their credit profile and financial situation.

  • Debt Consolidation Loan

Taking out a personal loan to consolidate all your outstanding debt can help free up some cash flow in addition to reducing rates of interest. Some options are available with 0% APR for an introductory period, but it’s smart to shop around with different banks and compare APRs, fees, and repayment terms before committing to one loan or another. There may also be tax benefits associated with consolidating your debts into a single monthly payment through a personal loan, so that’s something else that should be considered when weighing your borrowing options. However, before taking on this kind of loan, you need to ensure that it will be affordable after your interest rates rise.


Debt repayment strategies to determine that paying off credit card debt is possible with a strategic plan. The method suggested in this article can help people manage their debts better. Give them all some consideration and decide which one best fit what you want to achieve in the future, whether saving money or getting out of debt more quickly. If you’re looking for more information on how to repay your debts, click here: