Debt Action Plan

There are two ways you can create a plan to pay off your debts. The “Debt Snow-Ball Plan”,where you pay your debts from smallest to largest, or you can focus on repaying the ones with the highest interest rate first.

Using the Debt Snow-Ball Plan, you’ll pay off your debts from smallest to largest regardless of interest rate. Start by making a list of all of your debts from smallest to largest. Make minimum payments on every debt except the smallest one. Pay as much as you can towards the smallest debt even if it is $10 more than the minimum payment.

Once you pay off the smallest debt, add the freed-up money from paying off the first debt to the minimum payment of the next debt on your list. Continue to pay minimum payments on all other debts. When you pay off the second debt, put all that money to the next debt on your list. Keep at it until you’ve paid off every single item on your list.

To repay debts with the highest interest rate first make a list from highest to lowest interest rate. Because so much of your monthly payment goes toward interest, you have to increase the number of your payments if you want to make noticeable progress toward paying off high-interest rate debts. Continue to pay the minimum on all your other debts and put all your extra money toward the highest-interest rate debt. Once you’ve paid off one debt, you can work on the debt with the next highest interest rate, and so on, until you’ve paid all your debts.

Both action plans are good and neither one is better than the other one. Use whichever makes more sense for you and start taking control of your finances today!

Need help figuring out which method to use? Click Here! and find out how to set up your debt action plan!