05 Jun DebtCo Group’s Example Debt Repayment Plan Template
A lot of us have a mountain of debt with absolutely no clue of how to pay it off. If you’re overindebted and dealing with an amalgamation of debt, say credit card, store card auto loan, and mortgage debt, it can be difficult to know where to start. Are there methods you can use? Furthermore, how would you make a plan to mitigate your overindebtedness?
Debtco Group has put together a guide on how to create templates that will work to pay off your debt using our favourite two methods: the snowball and avalanche methods. Ready to kick debt to the curb? Let’s discuss how to strategise debt payments.
Crash Course on Repayment Strategies
There are two main schools of thought on debt repayment strategies. Namely, the snowball and avalanche methods. Each method has its pros and cons, so it’s important to have a careful think about what your repayment plan goals are and make a decision from there.
The Snowball Method
This is when you start with paying off your smallest debts first. Once that’s paid up, you work toward the next biggest debt. As you keep paying off debt, the amount owed gradually decreases. For example, you might start on a Truworths store account you owe R4000 on, then a R10 000 personal loan, and then a R30 000 education loan.
The Avalanche Method
The avalanche method focuses on paying off the highest interest-rate loans first. So, if you have a 30% interest loan, a 10% one, and a 3% one, you would start with the 30% one. If you have a high principal, though, this method could be discouraging.
Strategising with The Methods
Here is how we recommend you put these two methods to work.
The Snowball Method Strategy
First, make a list and organise your payment information, including the total amount owed, minimum monthly payments, and due dates.
Secondly, arrange your debts from smallest to largest amounts. Determine if you can put any extra cash to paying off your debt more quickly after making minimum payments on all your other debts. This will help you pay off more quickly in the long run.
As you make progress, use the money you used to pay off the first debt (including the extra cash) to pay off the second smallest debt, and so on.
The Avalanche Method Strategy
Start by making a list that organises your payment information– total amounts owed, minimum payments, and due dates. Then, arrange your list so it descends from debts with the highest interest rates.
Try to budget beyond minimum payments, determining if you have any extra room in your budget to make more than minimum payments for your highest interest rate account after making minimum payments on all your other accounts. When you’ve paid off the account with the highest interest rate, take the money previously used — the monthly payment and the little extra you budgeted — and put it toward the next-highest interest rate account debt.
Either method will take time. The important thing is making a plan and sticking with it consistently. Even if you don’t have money to do fun stuff like going out to eat or for drinks, remember that short-term sacrifices will set you up for a better future.
If you’re struggling to make minimum payments or feel like your debt is just too much, contact Debtco Group. We’ll help you negotiate with you’re creditors and halt legal action in its tracks.
Stop Struggling
and take the first step to financial freedom