Strategies for Getting Out of Debt

You will never get out of debt accidentally - you need a plan!

“Good planning and hard work lead to prosperity.” - Proverbs 21:5

If you want to be prosperous, you have to have a good plan. If you want to get out of debt, it takes a plan. There are different methods for getting out of debt - we've shared a few below.

You need a plan - and you also need patience. There’s no quick fix. It takes time and commitment. We're praying you develop a plan and work it through until you are completely debt free!

Strategies to Get Out of Debt

If you’re ready to get out of debt, here are some strategies you can apply to your finances...

Plan To Pay More Than The Minimum Payment

Go through your budget and decide how much extra you can put toward your debt. Paying more than the minimum will save you money on interest and help you get out of debt faster.

Let’s say you have a $15,000 balance on a credit card with a 17% interest rate and a $450 minimum payment. If you only make the minimum payment, it will take you almost four years to repay the balance. You’ll pay about $5,500 in total interest.

If you paid $550 a month, or $100 more than the minimum, you could repay the debt in less than three years and pay only $4,100 in total interest.

There are a couple strategies to use when paying more than the minimum payment each month:

The Debt Snowball Method

The Debt Snowball Method involves making the minimum payment on all your debts except for the smallest one. Each month, you’ll pay as much as you can toward the smallest debt. Once the first debt is paid off, you’ll apply all the payments from it to the next smallest debt. By “snowballing” payments toward your smallest debt, you’ll eliminate it quickly and move on to the next smallest debt while paying minimum payments on the rest.

Let’s say you have a $5,000 credit card balance, a $1,000 auto loan and $10,000 in student loans. With the debt snowball method, you would focus on paying off the auto loan first, because it has the lowest total balance.

The debt snowball method can help motivate you to focus on one debt at a time instead of multiple, helping you build momentum and stay on track.

The Debt Avalanche Method

The Debt Avalanche Method involves making minimum payments on all your debts except for the one with the highest interest rate. Each month, you’ll pay as much as you can toward the debt with the highest interest rate.

Let’s say you have a $5,000 credit card balance with an 18.99% interest rate, a $1,000 auto loan with a 3.2% interest rate and a $10,000 student loan with a 4.5% interest rate. With the debt avalanche method, you will focus on paying off the credit card loan first, because it has the highest interest rate. Then you will apply all those payments to the debt with the next highest interest rate.

The debt avalanche method can result in paying less interest over time, but it requires discipline.

Commit Windfall Money to Debt

When you get a tax refund or stimulus check, add the money to your loans instead of saving it in your bank account or splurging on yourself. You can decide to commit the entire windfall or split it 50-50 between debt and something fun, like a future vacation or expensive dinner.

Refinance Debt

Refinancing debt to a lower interest rate can save you hundreds in interest and help you repay debt faster. You can refinance mortgages, auto loans, personal loans and student loans.