Debt Relief: How to Get Out of Debt on Your Own

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While credit counseling and management systems might be alluring, it is entirely possible, even with a huge debt burden, to get out of debt on your own with a few well-loved debt relief strategies.

1. Pay More than the Minimum

Paying only the minimum payment, which is usually a small percentage of your balance, will ensure that you pay more interest on your debt than you should. Instead, pick a fixed amount (the largest you can afford), and hammer away at that debt every month.

Consider a card with a 12 percent APR, a $5,000 balance, and a monthly payment of three percent of your monthly balance. If you only paid the minimum, it would take you more than 12 years to pay off your balance and cost you $2,361.27 in interest. On the other hand, by choosing a fixed amount of a mere $150 per month, you would pay off your debt nine-and-a-half years sooner. With only 41 months of payments and $1,112.48 in interest, you’d end up saving $1,248.79 in interest payments.

2. Avalanche Method

Make an avalanche of debt relief happen by ranking your debt by interest amounts, highest interest paid first. Then, decide the total amount you can possibly afford to put toward debt every month to help you get out of debt. Pay the minimums on the cards with lower interest rates, and put the rest toward your highest interest-rate debt. Once the highest interest-rate debt is paid off, apply the total amount you were paying on the first debt to the next highest interest-rate debt. With this method, you’ll be paying less interest over time.

3. Snowball Method

With this method, instead of organizing cards by interest rates, you’ll organize them by balances, smallest balance first. Then, like before, determine the maximum you can pay toward all your debts, and then start paying the minimum on the other debts, and apply the rest to the smallest balance (often, with this method, a debt can be eliminated within the first month or two). Once the smallest-balance debt is eliminated, apply what you were paying to that debt, to the next largest debt. While you may end up paying more interest with this method, eliminating debts faster can feel more rewarding, increasing the motivation to stick with the plan.

Whichever method you choose, remember that the key to eliminating credit card and other types of debt is not to accrue more debt in the meantime. Put away those credit cards and change your shopping habits. It’s time to get control of your finances and get out of debt!

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