Debt Consolidation

Setting a Timeline to Pay Off Your Debt

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Skipping your morning lattes is a good start to paying off your debt, but you’ll likely need to do some planning if you want to be debt-free as soon as possible. If you live in one of the best places to pay down debt — such as Cincinnati, Milwaukee, Minneapolis, Nashville or Oklahoma City — you might have an easier time than someone hailing from high-cost cities like Riverside, Calif., Detroit, Los Angeles, New York and Miami, where paying off debt is more challenging.

Regardless of where you live, the first step to digging yourself out of a debt hole is setting a timeline to pay off your debt. Whether you need a few months or a few years, here’s how to figure out a debt repayment timeline that will save you money and speed up your repayment process.

Creating a timeline to pay off your debt

Calculating how long your debt repayment will last can help you stay focused as you make payments. Even better, it can give you an idea of how extra or larger payments can speed up repayment.

Before you get started on creating a time, make sure you check your credit score. A good credit score may open up options for lowering your interest rate, as discussed below, so it’s important to know where you stand. Once you’ve done this, it’s time to dive into your accounts and start planning.

1. Add up your debts

The first step is to get a clear picture of how much you owe. If you’re paying off multiple balances, check the balance on each account and write it down. Note your minimum monthly payment for each one as well. Finally, add up all of the balances and write down the total so you can see exactly what you’ll be chipping away. Recalculating this total periodically as you pay off debt will help you track your progress.

2. Check your interest rates

As you’re going through your balances, write down the interest rate you’re being charged on each account. Your interest rate is printed on your monthly statements, or you can call your lender if you’re unable to find it. This number will help you figure out how to prioritize repaying multiple accounts, which we’ll discuss below.

3. Track your income and spending

Next, you’ll look at your monthly spending. An easy way to do this is to download a popular budgeting app, such as Mint, and link it to your bank accounts. But you can also comb through your bank statements manually. Subtracting your monthly spending from your monthly income will give you an idea of how much money you can afford to put toward your debt each month.

4. Calculate your debt repayment

Now is time to do the calculations for a few different timeline scenarios to better understand how much time and money you’ll spend on your debt. MagnifyMoney, a subsidiary of LendingTree, has a helpful credit card payoff calculator and a personal loan repayment calculator.

For example, if you’re paying off a $10,000 loan with a 6% interest rate, you can have it paid off in seven years by making monthly payments of $146. In the end, you would have spent $12,271 on the loan including interest fees. Increase your monthly payments to $193, and you would have the loan paid off in five years. In that case, you’d spend $11,600 on the loan.

Now let’s consider credit card debt. If you’re paying off a $15,000 credit card balance at a 16% interest rate, making $350 monthly payments will leave you paying a total of $22,390, and it will take you five years and four months to pay off the balance. Increase your monthly payments to $450, and it will take you three years and nine months to pay it off. You’ll spend a total of $19,970. If you can manage to pay off $1,000 per month, you’ll have it paid off in a year and five months, and you’ll only spend $16,848 doing so.

5. Study your budget

Now it’s time to study your budget and figure out how much money you can afford to put toward your debt each month. Make sure you’ve identified areas where you can cut spending and think about ways to increase your income:

  • Negotiating a higher salary
  • Picking up a side gig
  • Selling some of your belongings

Once you’ve settled on a number, you can use a debt repayment calculator to figure out how long it will take you to pay off your debt. Don’t be afraid to set a timeline that’s a little more ambitious than what you can currently afford, as it will encourage you to cut your spending and put extra money toward your debt.

7 strategies to pay off your debt

While implementing a debt repayment strategy, it’s crucial that you stop using your credit cards completely. Otherwise, you’ll be negating all of your efforts. Here are some of the best strategies to help you pay off your debt quickly and save money.

  • Pay more than the minimum balance: Paying the minimum monthly payment is a good way to stay in debt for a long time and rack up massive interest fees. Let’s say the $8,000 loan you took out at a 10% interest rate requires $170 monthly payments — paying that minimum each month means you’ll finish it off in five years after spending $2,199 in interest fees. If you cut out cable or eating out and put an extra $88 toward your loan each month, making monthly payments of $258, you’ll have your loan paid off in three years, and you’ll save nearly $1,000 on interest fees.
  • Debt avalanche: The debt avalanche is the most efficient debt repayment strategy if your goal is to save money on interest. You focus on paying off your highest interest balances first, putting all your extra money toward those and paying only the minimum on your other balances. Each time you pay off an account, you shift your focus to the balance with the next highest interest rate.
  • Debt snowball: The debt avalanche might be the most mathematically efficient debt repayment method, but research from the Harvard Business Review shows that the debt snowball method is more effective in practice because it plays on our emotions and desire for quick results. With this method, you’ll put all your extra cash toward your smallest debt balance while paying the minimum on your other balances. Once that one is paid off, you move on to the next smallest balance. While you might end up spending more money on interest, seeing your hard work pay off early on can motivate you to pay your debt more quickly than slowly chipping away at a massive balance.
  • Negotiate lower interest rates: Give your lender a call and simply ask for a lower interest rate. You will need to be in good standing with your lender, and be sure to reference your history of on-time payments. If your credit score has increased recently, mention that as well.
  • Balance transfer: There are now plenty of balance transfer credit cards that offer promotional 0% interest rates on balance transfers, meaning you don’t have to pay any interest at all for the first few months. The best balance transfer credit cards come with promotional periods of 15 months to 21 months, and you will need good credit to qualify. Keep in mind that most will charge a 3% balance transfer fee, so make sure the money you’ll save on interest is worth it. This can be a dangerous game if you’re not certain you’ll have the balance paid off in time, because once the promotional period ends, you’ll be paying the card’s regular interest rate, which tends to be very high.
  • Refinancing: This is particularly common with student loans and mortgages and involves paying off your current balance with a new loan that comes with better terms — usually, a lower interest rate. Decreasing your interest rate could save you a good chunk of change over time, but keep in mind that refinancing often comes with costs that can outweigh those savings, such as origination fees on the new loan or a longer loan term. If you refinance federal student loan debt, you might lose beneficial protections and more lenient repayment options in exchange for a lower interest rate. You will need to have a good credit score to qualify.
  • Debt consolidation: Similar to refinancing, debt consolidation involves taking out a loan to repay another balance. The primary purpose of debt consolidation is to combine multiple balances into one loan in order to streamline your monthly payments. Some people take out debt consolidation loans to lower their monthly payment obligation as well, but if your goal is to save money and get out of debt quickly, you should be looking for personal loans with a lower interest rate and shorter repayment terms.

By coming up with a specific due date and periodic goals for repaying your debt, you’re pushing yourself to pay it off quickly and holding yourself accountable. You’ll probably experience an initial bump in motivation once you develop a plan, but don’t lose steam over time. Tracking your progress each month will keep you going. Stick with your timeline, and your efforts will pay off.


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