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It's a Money Thing®

Strategies For Debt Repayment

Stuck in a mountain of debt? High-interest debt is stressful and expensive - paying it off should be a financial priority. According to a 2012 University of Nottingham study, those who struggle to pay off their debt are more than twice as likely to experience mental health problems like depression and anxiety. Debt repayment is more than a financial goal- it's also a health and wellness goal! So where do you begin? 

Get organized! Make a list of all of your debts, including the balances, the interest rates, and the minimum payments for each. Then, consider the following strategies for paying them off:



The Snowball Method:

  • Who it's for: This strategy is great for beginners who rely on visible progress in order to feel motivated.

  • How it works: Debts are arranged and paid off from smallest balance to largest balance. Once a debt is paid off, the money that would have gone to its repayment is applied to the next smallest debt instead.

  • Why it's great: Small debts are quickly crossed off your list, which can give you a confidence boost that helps you stick to your repayment plan.
Debt Repayment: The Snowball Method arranges debts from smallest balance to largest balance.

Debt Repayment: The Avalanche Method arranges debts from highest interest rate to lowest interest rate.



The Avalanche Method:

  • Who it's for: This strategy is ideal for those who truly believe that slow and steady wins the race. This strategy requires discipline and determination, as your most expensive debt may also have a large balance. 

  • How it works: Debts are arranged and paid off from highest interest rate to lowest interest rate. As debts are paid off, more money is freed up for repayment of other, smaller debts.

  • Why it's great: This strategy eliminates your most expensive debt first, making it the most mathematically powerful, and cost-saving debt repayment option. 



Consolidation:

  • Who it's for: This strategy is for those who are having trouble keeping track of all their various debts and repeatedly missing payment due dates as a result.  

  • How it works: A new loan is taken out and the borrowed money is used to pay off all your other debts. Be aware and shop around before you commit to a consolidation loan, as some may have a higher interest rates and additional fees. You also want to stop adding new debt when you are attempting a debt repayment strategy.

  • Why it's great: You only have one loan and one interest rate to keep track of, which will simply your debt repayment. 
Debt Repayment: When you consolidate, a new loan is taken out and the borrowed money is used to pay off all your other debts.


Debt repayment requires action, some discipline, and a lot of patience. Having a plan helps track progress and keeps you from getting discouraged. If you're unsure or overwhelmed with where to start or don't know which strategy is best for you, talk to one of First Florida's Member Service Representatives about the debt counseling resources that we provide free for our members. 

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