Creating a Debt Repayment Plan

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Debt Repayment Plan

We’ve all tried closing our eyes and hoping when we open them our debt will have magically disappeared. So, we all know that strategy doesn’t work — in fact, debt denial actually adds fuel to the fire, giving it time to grow as we ignore it.

What you need is a debt repayment plan. This includes a strategy, a timeline, a progress tracker, and the willpower to sacrifice non-essentials until your debt is paid off. Here’s more information on how to make your debt elimination efforts stick.

Know Your Options

The key to getting debt repayment right the first time around is picking a strategy well suited for your needs. It will depend on your circumstances, like how much and what kind of debt you’re facing. Your options for debt relief will also depend on factors like your credit score and income situation.


Reading about your options for debt elimination online is a good way to understand the pros and cons of various strategies, as is talking to people who may have experience with them.

Here are a few approaches to debt repayment worth exploring:

  • Do-it-yourself methods: Through a combination of budgeting and strategic monthly repayment, you may be able to work down your debts on your own. Many experts advise paying off your debts in order — either from smallest to largest, or from highest interest rate to lowest.
  • Debt management: You’ll make monthly payments to a credit counseling agency, and they will distribute those funds to your creditors. The agency may be able to get lower interest rates or reduced fees for debt management plan enrollees.
  • Debt consolidation: If you qualify for a low-interest rate loan, you can use it to repay all your other high-interest rate debts. This can be advantageous if it saves you interest and condenses your monthly payments into a single one.
  • Debt settlement: Settlement is an option for those carrying thousands in unsecured debt like credit cards or medical bills, who are having trouble keeping up with minimum payments. If you enroll in a settlement program, you’ll make monthly deposits in a special account until it’s time for negotiators to reach out to your creditors — the goal is to get them to settle your debts for less than originally owed.
  • Bankruptcy: Chapter 13 bankruptcy protection involves creating a plan to repay part or all of your debts over the course of three to five years. Think carefully before filing, as bankruptcy can stay on your credit report for years.

Make a Realistic Timeline

It’s important to make a realistic timeline for repaying your debts based on the strategy (or strategies) you decide to pursue.

For example, you can expect debt management to take three to five years. Debt consolidation will depend on the terms of the loan you take out. Debt settlement can take between two and five years, but Freedom Debt Relief reviews show that enrollees have different experiences based on how many different accounts they’re trying to settle. Do-it-yourself debt repayment depends on how much debt you have and how much money you can devote monthly to paying it down.

Whatever strategy you choose, create a timeline. This will help you know what to expect as you go, and budget accordingly.

Sacrifice Non-Essentials

The more expenses you’re willing to give up, the quicker you’ll be able to pay down your debt — and the more you’ll save in interest. Comb through your budget to determine where you can make cuts. It may feel tough at first, but you’ll be that much closer to getting out from under the weight of what you owe.

Track Your Progress

Just like you have a budget to track your spending, you can and should have a tracker to measure your debt progress. According to NerdWallet, here’s what to include in your spreadsheet or template:

  • Account names and types
  • Outstanding balances
  • Interest rates
  • Minimum payments due
  • Payment due dates

A strong debt repayment plan contains a strategy, a timeline, a progress tracker, and some sacrifice. Stick to it and you’ll be well on your way to financial freedom.