September 27, 2022

The Best Repayment Options for Managing Your Debt

Are you struggling to make ends meet and having a difficult time paying your bills? Are you getting alarming notices from debt collectors? Or are you worried about losing your grip on your future due to potentially losing your home or vehicle? In such cases, you need to understand that many in similar circumstances before you have taken steps to stabilize their finances and get out of debt. And you can too.

Millions of individuals and thousands of families are affected by the pitfalls that being in debt can bring. The most important thing you can do is take that first step made possible by taking courage, knowing that it can be overcome and that you have avenues available. Taking a rational and mindful approach to managing your debt can truly improve your situation and give you the tools and resources to prevent it from happening again.

What are the best ways to get out of a lot of debt?

You have many options for getting out of overwhelming consumer debts, from self-help and do-it-yourself options to third-party services and bankruptcy. Which option is best for you depends on your types and amounts of debt, your personal commitment, and how much you want to protect your credit rating while getting out of debt?


When it comes to getting out of debt, there’s no help like self-help. Except in the cases of emergency debt issues that threaten repossession and foreclosure, most should explore the self-help path before approaching third parties. Self-help has many advantages. It does not involve fees. It leads to self-empowerment through increased knowledge and practice.

Minimum Payment

Depending on the broader economy, between one-third and one-half of households with credit card debt take the debt reduction path of minimum payments. Unfortunately, this path typically leads to unending debt. After they make a payment, they use the card again and return the balance to previous levels.

What’s more, in most cases, 50% to 75% of the minimum payment goes only to cover the interest charges, with just 25% to 50% paying down the principal balance by just 1%. Even if the consumer stopped using the credit card, it could take her or him 15 to 25 years to pay off their debt by making just the minimum payments each month.

Negotiating Lower Interest Rate

Even at minimum payments, you can accelerate your debt elimination by negotiating lower interest rates with your creditors.

Studies regularly show that the vast majority of credit cardholders who request a lower interest rate from their credit card company actually get what they ask for from 70% to 83% of the time. You will increase your chances of successfully negotiating lower interest rates if you have a one-year history or more of on-time payments to the creditor. In your phone call or message to your creditor, simply point out your history of on-time payments and ask how willing they are to lower your interest rates.

Another approach involves threatening to transfer your balance to another credit card if your creditor does not lower your interest. If you choose to go this route, you might consider softening this threat by using language such as, “I don’t want to transfer my account to another creditor with lower interest rates…” or “I know I can get a lower interest rate elsewhere, but I would prefer to keep my account with you…”

Send Extra Payments

To pay off your debts faster than the minimum payment method, send an extra amount each month along with the minimum payment. Every extra cash you send, especially early on, will save you more in interest down the road.

Many consumers will state they have no extra money to send because they are living paycheck-to-paycheck already. For most such consumers, we recommend they consider the PowerCash principle.

The PowerCash method is simple: 1) Identify the amount of money you spend monthly on groceries, dining out, carry out, entertainment, gift-giving, travel and vacation, and any other purchases you have discretion over, 2) Multiply this amount by 10%, 3) Add that 10% to your creditor payment, and 4) Use the remaining 90% as you normally would.

We find consumers who try the PowerCash method feel little if any pain in their wallets because most can adapt their spending to the remaining 90% of their earlier spending levels.

Do-It-Yourself Debt Repayment Methods

With a little PowerCash to send to your creditors to accelerate your debt reduction, your next decision to make involves choosing which debt to accelerate first. Or, do you split the PowerCash equally between all your creditors?

The easy answer is to send all the PowerCash to a single creditor while making minimum payments to all others. Focusing on just one account at a time increases motivation by rewarding you with discernable progress on that account.

Choosing the focus account, though, requires you to decide your goal for getting out of debt.

“Wait, isn’t getting out of debt the goal?” you ask.

Actually, getting out of debt is just the path you take to your goal, not the goal itself. Your goals should involve something personal and meaningful that involves money that you currently don’t have because you have to pay back your debts.

A list of goals for paying off your debts might include one or more of the following:

  • Have enough money each month to save for a family vacation.
  • Afford to replace my old and unsafe vehicle with a newer, more reliable one.
  • Finally, feel the security of knowing I am building an emergency savings fund each month.
  • Build my credit rating so I can qualify to buy a home next year.
  • Find relief from the frustration of being in debt for years.

We have identified four do-it-yourself debt repayment methods you can match up to your list of debt elimination goals. All four of them require you to stop using your credit accounts for additional purchases. You can’t dig yourself out of debt. You’ve got to stop going into additional debt.

Debt Avalanche

What you do: Add your PowerCash to the minimum payment every month from your account with the highest annual interest rate and continue doing so until the account is paid off. Then, move the PowerCash and the minimum payment from the paid-off account to the next account with the highest interest rate on your list.

What it does for you: By accelerating the debt payoff on your highest interest account, you pay far less money in interest over time and you pay off the debt earlier than any other method.

Goals it helps you achieve: The Debt Avalanche helps you achieve any financial goal that focuses on increasing money available to you or on getting out of debt as soon as possible.

Debt Snowball

What you do: Add your PowerCash to the minimum payment every month from your account with the lowest balance and continue doing so until the account is paid off. Then, move those payments to your account with the next lowest balance. As soon as you feel sufficiently motivated, though, change from the Snowball to either the Avalanche or Landslide method.

What it does for you: Many people feel more motivated to continue their debt repayment if they can get a quick and easy “win” (paying off an account in full).

Goals it helps you achieve: The Snowball does not achieve a personal goal. However, you should consider this method if you need to kickstart your debt repayment-related goals.

Debt Landslide

What you do: Add your PowerCash to the minimum payment every month from the account you opened most recently and continue doing so until the account is paid off. Then, move those payments to the next newest account on your list.

What it does for you: Because credit scoring models weight activity on newer accounts more heavily than activity on older accounts, you can increase your credit score faster than with any other method.

Goals it helps you achieve: If your financial goal involves qualifying for a major purchase using credit in the future (e.g. mortgage, business startup), this method makes the most sense.

Debt Cascade

The Debt Cascade works for households that can’t come up with any PowerCash to accelerate their debt repayment. It works by helping you find PowerCash within your minimum creditor payment every month.

What you do: Add up all the minimum monthly payments you owe this month. This is your “Cascade Money.” Next month, your minimum payments on credit cards and store cards will go down a little. Instead of sending the minimum payment the creditors’ request, send your Cascade Money again. It may only amount to a couple of extra cash early on, but after four or five months, your Cascade Money may amount to more than what your creditors are asking for. In fact, starting with your second month of payments, you can take any extra Cascade Money over and above the minimum payments and focus it on a single account based on the Avalanche, Landslide, or Snowball methods above.

What it does for you: The Cascade lets you accelerate your debt repayment even if you currently have no wiggle room in your budget.

Goals it helps you achieve: The Cascade helps you get on the path to debt elimination, even if it previously felt impossible.

Debt Relief Services

Whether you’re struggling with a high burden of unsecured debt such as credit cards, payday loans, medical bills, or even collection accounts, and you’ve been unable to successfully work out payment agreements with them, consumer debt relief services can offer you the help you need.

Everyone has a unique situation when it comes to their ability to repay their debt so there is not a perfect solution for everyone. There are nonprofit organizations that have been providing debt relief to consumers for decades. These nonprofits provide Credit Counseling and are a preferred method for individuals looking to manage their debt primarily because they counsel and provide a great deal of information and options back to the consumer in regard to how they could potentially deal with their debt.

If you’re at the point where you want help with improving your finances and getting out from under a heavy debt load, be sure to do your homework first.

Don’t Settle for Debt Settlement Until You’ve Done Your Homework

There are for-profit entities that offer to settle your debt. We urge you to read our warning as it relates to Debt Settlement before speaking to an organization that promises debt relief through a settlement program:

Knowing how settlement works prior to making the call can help you in the decision-making process, and ultimately help you choose the right path.

You may also find credit repair organizations. Again, these are for-profit services that have a poor track record in helping consumers get out of debt with minimal impact on their prospective financial futures.

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