How to Pay Down Debt

2 Min. Read

Paying down your existing loans is a worthy pursuit, but one that can feel like a slow mountain to climb. If you’re trying to get your finances in order, managing your debt and your credit score can be stressful and sometimes discouraging—but you’re not alone.

According to the Urban Institute, there are more than 64 million Americans with credit card debt. Another 340 million Americans are carrying some form of debt, big or small.

Here, we’ll show you how you can pay down all or most of your existing debt by cutting back on your budget and eliminating unnecessary expenses in less time than you think.

Steps to Consider When Paying Down Debt

High-interest debt adds up fast. Paying down existing debt on loans or credit cards is the perfect way to take control of your finances. If you create a solid plan and stick to it, you’re bound to make progress on your debt management journey.

Here are seven steps to follow to pay down your existing debt:

1. Assess (or reassess) your expenses. Make a list of all the things you spend money on each month. Compare your expenses to your income and calculate the size of the gap. This list will help you determine where you need to budget and reduce spending.
2. Set a budget. Once you’ve evaluated your expenses, determine how much money you can allocate toward paying down debt each month. Make debt payoff a priority over other expenses, like entertainment or eating out.
3. Take an inventory. Make a list of all your debts, recording the amount you owe, the interest rate, and the minimum payment.
4. Rank order by highest APR. Determine which of your debts has the highest interest rate (APR) and prioritize paying this one off first.
5. Increase your payment. Start chipping away at the debt by paying more than the minimum required—but not more than 15% of what you earn per month (after taxes).
6. Tackle the next debt on the list. After making extra payments on your highest interest debt for several months, shift your focus toward paying off loans or credit cards with lower interest rates next.

7. Check your credit report regularly to look for errors that could impact your score. Take swift action to dispute errors with the credit bureaus or your creditors if necessary (you can do this online).

At Marine Credit Union, we believe everyone can achieve financial freedom, no matter their current financial standing. Contact us today to talk to our financial counselors or gain more information on financial resources.