- 1). Make a list of all your accounts. Include mortgage accounts, student loan accounts, credit accounts, auto loans and any and all other debt you owe. If you aren't sure how much you owe, you can get a copy of your credit report. You are entitled to get one free from each of the three major bureaus--Experian, Equifax and TransUnion--on an annual basis, and the credit report will list all of your open accounts, balances and monthly payments due.
- 2). List all of the details about each account, including account number, interest rate, current balance, monthly payment, monthly payment due date and online login details if you have them. If you don't know any of this information, check your online accounts or contact the lenders (the phone numbers of the lenders should be on the credit report). This list should be a complete accounting of everything you owe and how and when to pay it.
- 3). Organize your list in order of highest interest rate to lowest interest rate or lowest balance to highest balance. Separate mortgage and student loans from higher interest debt when doing this step. This will help you create a debt repayment plan, since you'll be able to see at a glance what is costing you the most. It makes mathematical sense to pay off debts beginning with the highest interest rate and working toward the lowest, but Dave Ramsey--a popular financial analyst--recommends paying off debts from smallest balance to largest balance in order to remain motivated by small victories. You'll need to decide which plan is best for you.
- 4). Create a plan to pay off high interest debt. This can mean doing a budget to find out if you have any extra money available each month to pay toward some of your higher interest debt. Alternatively, it can just mean making all the monthly payments on time if you don't have extra cash (although it may take you a long time to get out of debt if you make minimum payments only). Finally, if you are unable to pay all of your bills, this can help you see that you need to make some more wiggle room in your budget, earn extra income or prioritize which debts will or won't get paid.
- 5). Set up automated payments. If your creditor or bank account allows this, this is usually the easiest way to organize your debts and ensure you aren't late at making a payment. If you do decide to take this step, though, make sure you are careful that you budget for this and balance your checking account carefully so you don't end up with accidental overdrafts.
SHARE
