Make a plan to pay your debts
Choose a strategy
When you have created a list of your current debts, begin your plan. The type of debts and the amount of these debts allow you to find the right strategy to pay them off.
Choose a time frame
Choose a payment schedule that is reasonable and that you can meet.
If your deadline is too long, you may become discouraged by the lack of progress, and end up paying more interest.
If your deadline is too short, you may not be able to make your payments, and feel discouraged.
Keep in mind, if interest rates go up, your monthly payments may go up.
Protect yourself if interest rates rise.
Decide on the first debts to pay off
Depending on the type of debt you owe, the best strategy is to pay off some debts first.
Debts with the highest interest rates
By paying off the debts with the highest interest rates, you pay less interest. This helps you get out of debt faster.
List your debts by their interest rates, with the highest rates first. Make the minimum payment for all your debts. If there is money left, pay off the debt with the highest interest rate.
For example, payday loans often have the highest interest rates followed by credit cards.
Learn how payday loans work and what questions to ask the payday lender.
Know the interest charges and minimum monthly payments when you make a payment on your credit card.
Debts with the lowest balances
You can decide to start with the debt with the lowest balance. You will have the satisfaction of repaying it faster. It can motivate you to pursue your goal of getting rid of debt. However, this option can cost you more in interest over time.
Make a plan to repay your family or friends
If your family or friends have given you a personal loan, you should tell them. Work out a repayment schedule that works for you and the person you owe the money to.
You can submit post-dated checks or arrange automatic money transfers to meet your repayment schedule. It also tells the person that you are committed to paying them back.
Work directly with your creditors and financial institution
Your creditors can offer you:
a lower interest rate for your debts
extending the duration of your payments to reduce the amount of your monthly payments
consolidation of your debts into a single loan