How to Pay Off Debt and How to Handle Debt

Posted on Monday 29 June 2020

Debt is a normal part of modern life, and most people have one debt or the other. This debt can be from a credit card, a mortgage, a car loan, or anything else. In many ways, debt is even an indicator of financial progress.

Taking out loans or lines of credit helps determine your credit score. Your credit score, in turn, impacts your ability to sign a lease, take out student loans, or even make big credit purchases such as getting a car or buying a house.

While having some debts is not bad, there are situations where it can become overwhelming. Debts can get dangerous to your financial health. For example, taking out loans while unemployed can cause financial paralysis. If you're struggling to make your minimum payments on your credit cards or can't pay back your debts on time, it's time to break free of your debts.

Top Strategies to Help You Get Out of Debt

The following strategies will help you settle your debts and leave a more financially balanced life.

Before you start making moves to pay off your debt, you will need a good understanding of how to handle debt in the first place. Start with the two simple steps below.

Step 1: Get Real About Your Debt

Regardless of whether it's to your mom, your partner, a credit counsellor, or a work colleague, fessing up about your debt is hard. Many people find it easy to set their debt aside and avoid thinking about it instead.

Debt can lead to a significant emotional and mental breakdown. This can lead to anxiety, insomnia, strained relationships, and high blood pressure. However, one of the best ways to handle your debt is facing it and dealing with it very early.

Stop throwing out the reminders for your overdue bills and ignoring email reminders. Rather than avoiding your debt, be brutally honest about it. You can tally up all of your outstanding debts by creating a list of the total amount that you owe on:

  • Credit cards
  • Store credit cards
  • Auto loans
  • Personal loans
  • Any other debt such as a mortgage, overdue utilities, loans from family members, etc.

Make sure you list each account out separately. If you have many credit cards, this may be a little intimidating. However, it's a crucial step.

Getting real also means taking the necessary steps to cut expenses. For example, you may have to plan your meals and cook at home for a while rather than eating out. You also need to cut back on spontaneous trips. If you decide to travel, make sure you plan your holiday properly.

Step 2: Get Transparent with Your Debt

To effectively handle your debt, you need to account for every dollar. This means you need to know exactly how much you are paying back per month. Make your debt as transparent as possible. Take the same list and add the following to each tab:

  • Minimum payment requirements
  • Interest rates
  • Monthly finance charges
  • Due dates
  • Credit limit (if applicable)
  • Payday loans

Creating this detailed list gives you essential insight into how much you owe in fees and interest vs. the payments you are making. Handling your debt is about becoming your own bookkeeper. While this may not be the most exciting way to spend your weekends, it's an integral part of boosting your financial health. When it comes to handling debt, full transparency is vital.

How to Pay Off Debt For Good

Armed with a solid understanding of how much debt you have, you're ready to start paying it off. Here are some practical ways to start paying off debt.

Create a Debt Avalanche

The debt avalanche is a good choice for you if you have a few high-interest debts that are eating away at your monthly payments. Use your list that includes interest rates, and arrange each debt from the highest interest rate to the lowest. Here’s how you can set up your debt avalanche:

  • Make minimum monthly payments on all debts except for the debt with the highest interest rate.
  • Put as much money as possible toward the debt with the highest interest rate.
  • Once that debt is paid off, repeat the same process with the next account on the list.

It will take some time to see results from this method. This is especially if your accounts with the highest interest rates also have the highest balances. However, cutting back on high-interest accounts will save you tons of money over the long term.

If you are close to paying your high-interest debt off, you can use a payday loan to speed up the process.

Start a Debt Snowball

You can choose to create a debt snowball instead. This approach focuses on the total dollar amount. You can arrange the total amount of each debt from the highest to the lowest. Here'sHere's how you can start a debt snowball:

  • Make minimum monthly payments on all debts except for the one with the smallest balance.
  • Put as much money as possible towards the debt with the smallest balance.
  • Once that debt is paid off, take that same payment amount and apply it to the next account on the list.

This approach is excellent if you want to see results sooner. It's advantageous if you're feeling overwhelmed or stressed out about your debt and want to shed that off as soon as possible.

Consolidate or Refinance Your Debts

One of the best repayment plans is to make your debts as understandable as possible. Consolidating debts is a straightforward method if you have multiple forms of debt from more than one lender. For example, instead of making five or ten payments each month, you can combine your debt into one loan and make only one payment per month.

That also means that you get just one interest rate instead of multiple. Depending on the lender, you may even get a better interest deal. This is particularly useful for credit card debt, as it has some of the highest interest rates. A lower interest rate will help you pay back faster and boost your long-term financial health.

Refinancing is also an excellent option for more significant debts, such as an auto loan or a mortgage. While you may not see results immediately, you'll save money over the life of your loan with a lower interest rate. Don't rush into refinancing: take your time to research different lenders and opt for the lowest possible interest rate.

Take Out Payday Loans

You may also take out a larger personal loan and use those funds to pay off your debt, or you can get a series of short-term loans to pay off smaller debts, one by one. While this may appear odd, it's a good way to pay back faster if you have financial discipline.

Short-term loans have the benefits of fewer requirements for lending history, credit score, and income. This makes them a great option for borrowers with low credit scores due to debt.


Being in debt is tough, and there's no doubt that it can be a stressful time. But taking these first steps will make a massive difference in your financial health. Stay committed to being honest about your debt and staying transparent, and choose the debt-paying method that works best for you.