How to Choose the Debt Repayment Plan that Should Work Best for You

Chances are you’re in debt, which means you probably want to find a way out of it. In this, you’re not alone. 

Debt, these days, is a shared condition. The average American has $90,000 in debt. 

Fortunately, there are ways to escape debt and achieve financial freedom. You just need to be smart about it. 

Here’s a look at the three intelligent steps to take before you settle on the debt repayment strategy that should work best for you: 

1. Identify your financial situation

2. Identify your financial goals

3. Narrow down your debt repayment strategy options 

Step 1: Identify Your Financial Situation

When choosing the debt repayment strategy that should work best for you, the first step is to identify and understand your financial situation. 

That may sound simple, but people tend to be a little unrealistic about their financial situation. 

Sure, someone may think they’re on the path toward paying off their mortgage loans within the next five years, but are they really, or do his bank statements suggest otherwise?

Many people don’t realize that there’s a difference between the financial situation they like to believe in and the financial situation they’re really in. So, before people can understand their financial situation, they need to separate the two. 

To do so, take an honest look at your bank statements, bills, and the like. 

Also, consult a credit counsellor. 

What is credit counselling? It’s a helpful resource for people who want to refinance their debt. 

When you work with a credit counsellor at a non-profit credit counselling agency, they will help you identify your financial situation and goals, then settle on a debt repayment strategy that works best for you. 

In other words, they’ll guide you through steps 1 through 3 and beyond. 

Step 2: Identify Your Financial Goals

Once you understand your actual financial situation, the next step is identifying your financial goals. 

A recent graduate in their 20s may want to pay off their student debt before even considering their long-term financial goals. That’s doable. 

A working professional and parent may want to pay off their mortgage loans within the next 20 years while at the same time putting aside money for their children’s post-secondary education and saving for retirement. That’s ambitious, but not impossible. 

People who identify their financial situation and set their goals accordingly are far more likely to achieve these goals than people who don’t.  

Step 3: Narrow Down Your Debt Repayment Options 

Before selecting the debt repayment strategy that should work best for you, the final step is to narrow down your debt repayment strategy options. 

There are small, pragmatic debt repayment strategies that should work for everyone. These include spending within your means, keeping your old car rather than buying a new one, strengthening your portfolio, deleting credit card information from online stores, and monitoring your progress. 

But there are also major debt repayment strategies that work for some but not others. 

These include debt consolidation loans, debt consolidation programs, and mortgage refinancing. 

Final Thoughts

Once you’ve figured out your financial situation, goals, and options, you’re ready to choose the debt repayment plan that works best for you. The right plan could set you on your way to financial freedom, which is to say, freedom from debt.