In some instances, simply meeting everyday financial needs will result in large indebtedness after a bit of time. In terms of repaying this debt, you have many options. Perhaps the best and most effective option involves channeling your extra funds after every month to the higher-rate debt. This means maintaining nothing but your minimum payments on all other debt and then using what is left over to aggressively repay the higher-rate debt.
The first thing you should do is prioritize your debt. List each creditor and including total amount due, interest rate charged, and minimum payment due on a monthly basis. With this list in hand, you will see at a quick glance what is owed, how much you need to repay every months, and how which creditor is the biggest culprit in terms of interest rate.
With the completed list before you, determine how much you need to repay to all of your debt on a monthly basis. This means adding up the “monthly minimum due” column. Balance this amount against the funds you have available each month to pay toward your debt. Hopefully, you still have money left over. This amount should then be allocated to the top creditor (i.e. the one that charges you the highest rate). It makes no sense to spread out this extra amount – direct this extra money to your top priority.
Another good way of paying regularly and managing the personal finance is to keep depositing money in your savings account, no matter how minimal this amount might be. Even a $10 per pay period can add up and be used to pay down your debt once the savings amount accumulates. The importance of a savings account should not be overlooked as it can help weather future financial setbacks and can allow you to absorb unscheduled expenses.
As a last resort, consider borrowing money from family and friends to repay your higher interest debt. Since money from such sources is normally interest-free, you can repay such loans without having to worry about how much you are “giving away” to creditors who charge (much) higher rates.
For people with higher debt, the debt repayment plan will progress at a much slower pace. This is especially important to realize when it comes to staying on track with your plan, as you will likely get discouraged after making months worth of payments and seeing very little damage being done to your overall debt load. Keep in mind that once you start repaying debt, you will notice an almost-immediate improvement to your personal financial situation. And, within months, your credit score will echo your success.
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