Debt can feel like an iron weight chained to your ankle, dragging you deep underwater, far from the surface and the air of financial freedom. It may sound dramatic, but the simile is apt–debt is that much of an obstacle, and can be just as overwhelming and seemingly impossible to escape, once you find yourself in its clutches.

However, the important thing to remember is that escaping debt is not impossible. If you find yourself struggling to find the light at the end of the tunnel, this blog post will outline several strategies that could potentially help you.

Understand Your Debt

The first step to smart debt management is figuring out just how much debt — and what kind — you have. Each type of debt comes with its own set of considerations and rules. Some of the most common kinds of debt are:

• Mortgages
• Auto Loans
• Credit Card Debt
• Student Loans
• Medical Debt

Assess Your Debt

To do this, you must gather all of your financial documents and records: bank statements, credit card statements, loan statements, and any other relevant financial paperwork.

Then, make a comprehensive list of every debt you owe. Include the following details for each debt:

• Creditor or lender's name
• Type of debt
• Account number
• Current balance owed
• Interest rate
• Minimum monthly payment
• Due date

You should obtain a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) at least once a year; it will provide a detailed summary of your outstanding debts, account balances, and payment history. Make sure the information on your credit report matches the debts you've listed.

From this point, you should be able to organize your debts by priority. Categorize your debts into different groups based on factors like interest rates, tax deductibility (for example, mortgage interest may be tax-deductible), and importance.

As you’re considering your debt, try to reflect on the root causes of its accumulation. Where is most of it saddled; how and where did it begin to get away from you? Even once debt is offset, if behaviors and habits are left unaddressed, you may find yourself back in the exact same position in future.

Create Your Debt Management Plan

It is absolutely key to create a realistic budget and track your expenses when you’re trying to reduce debt.

To set a realistic budget:

• Calculate your income: This should include your salary, bonuses, rental income, side gigs, and any other funds that regularly come in.
• List your fixed expenses: regular and consistent monthly costs that don't vary much, including everything from mortgage or rent, to utilities, insurance, and even your streaming services.
• Identify variable expenses: review your past spending to estimate the costs that fluctuate from month to month, like groceries, dining out, entertainment, and transportation.
• Set aside savings: remember to pay yourself first by treating savings as a non-negotiable expense, and allocate a portion of your income to savings, including contributions to retirement accounts, emergency funds, and other goals.
• Factor in irregular spending: some expenses occur periodically but not monthly, like annual insurance premiums, holiday gifts, or car maintenance. Divide the annual cost by 12 to include them in your monthly budget.

Taking all of these factors into account, create a budget that balances your income with the listed expenses and savings goals. Make sure your budget is realistic and sustainable over the long term–this is one instance when you don’t want to be overambitious.

The next step is to consider the minimum monthly payments for each of your debts. You should have the necessary information for each debt–like the interest rate, outstanding balance, and the minimum monthly payment required–from the list you’ve already made. (If not, you can find this information on your monthly statements or by contacting your lenders). If you possibly can, it might be worth paying over the minimum monthly payment for some of these debts; you could dig yourself out more quickly.

When you are trying to decide how much you can reasonably contribute to debt repayment each month, look at the budget you have constructed. Allocate a significant portion of your surplus towards paying off your debts. Consider either focusing on the highest-interest debt first (the debt avalanche method) or the smallest balance (the debt snowball method).

Prioritize Debt Repayment Strategies

As mentioned above, there are multiple different methods or strategies you might employ when trying to eliminate debt.

Avalanche Method

A debt repayment strategy that focuses on paying off your debts in a way that minimizes the total interest you'll pay over time, prioritizing high-interest debts to allow you to become debt-free more quickly and cost-effectively.

You will first arrange your list of debts in descending order, with the debt that has the highest interest rate at the top of the list and the one with the lowest interest rate at the bottom. Now, even as you continue to make the minimum monthly payments on all of your debts to avoid late fees and maintain a positive credit history, allocate any additional funds you have available for debt repayment to that debt at the top of your list. This is where the method gets its name, as it "avalanches" your efforts toward the highest-cost debt.

Once you've paid off the first debt, take the money you were allocating to it (both the minimum payment and the extra funds) and apply it to the next debt on the list. Keep going down your list until it’s empty!

Snowball Method

The debt snowball method focuses on paying off the smallest debts first.

Arrange your list of debts in ascending order, with the debt with the smallest outstanding balance at the top of the list and the one with the largest balance at the bottom. While you continue to make the minimum monthly payments on all of your debts to avoid late fees and maintain a positive credit history, dedicate any additional funds you have available for debt repayment to the debt at the top of your list (the one with the smallest balance).

Put as much money as possible toward paying off the debt with the smallest balance while making minimum payments on the others. As you pay off this smallest debt, you'll experience a sense of accomplishment and motivation! Once that smallest debt at the top of the list has been paid off, get to work on the next debt on the list.

By paying off smaller debts first, you achieve quick wins, which can boost your confidence and motivation. As you clear each debt, the amount you can allocate to the next debt increases, helping you build momentum.

Note that the debt snowball method may not minimize the total interest you pay–unlike the debt avalanche method. However, it can be highly effective for people who need the motivation to stay committed to their debt repayment plan.

If you’re wondering whether it’s better to pay off debt with your surplus income each month, rather than allocating some to your savings, you’re not alone; it’s a common conundrum. As a general rule, the sooner you can get out of debt, the more money you’ll save in the long run, and the faster you can put that portion of your budget into savings. According to numbers from the Bureau of Labor Statistics and U.S. Census Bureau analyzed by NerdWallet, U.S. households carrying credit card debt will pay over $1,380 in interest this year. Obviously, the sooner you can relieve yourself of that kind of debt, the better!

Plus, high-interest debt can accumulate interest at a much higher rate than what you can earn from savings or investments. So, by paying off high-interest debt, you are effectively "earning" the interest rate you would have paid on the debt.

Lastly, it’s important to remember that debt has a negative impact on your credit score. A low credit score will make it difficult for you to obtain favorable terms for future loans and endeavors in general–so, again, in the long run, it can be a good idea to prioritize paying off debt over increasing your savings.

Negotiate with Creditors

Did you know that it may be possible to negotiate with your creditors for lower interest rates? If you are able to do so, you could reduce the total amount of interest you'll pay over the life of the loan. This can save you a substantial amount of money, especially if you have large outstanding balances or high-interest debts. Plus, the lower monthly payments would make it easier to meet your financial obligations and improve your monthly cash flow, reducing financial stress. It could even help you climb out of debt more quickly!

Review your payment history, and research the current interest rates for comparable loans. If you have made your payments on time, you will gain credibility with your creditor, and the other rates should give you a strong basis of comparison while negotiating. When you speak to the lender, you should be prepared to provide specific reasons for your request, such as financial hardship, a history of on-time payments, or those competitive market rates.

During the conversation, explain your financial situation honestly and avoid becoming confrontational. Clearly state your request for a lower interest rate. For example, you might say, "I'm currently paying an interest rate of X%, but I've seen other offers for similar products at Y%. I'm wondering if it's possible to lower my interest rate to match or come closer to those rates." Ultimately, you may need to wheedle or compromise–but whatever the outcome, if you reach an agreement with the creditor of any kind, request written confirmation of the new interest rate and any changes to the terms of your debt.

Consider Debt Consolidation Loans and Other Alternatives

A debt consolidation loan is a financial product that allows you to combine multiple debts into a single loan. Once you have a debt consolidation loan, you'll have a single monthly payment to make, typically to the lender that provided the consolidation loan. This is more convenient and easier to manage than keeping track of multiple payments to different creditors. Other benefits include the opportunity to obtain a fixed interest rate, as well as the potential to improve your credit score by making consistent, on-time payments on such a loan. It’s also possible that you can pay off your debt more quickly by focusing on a single, consolidated loan, as you're likely directing more of your monthly payment toward the principal balance.

Another strategy is the transfer of credit card balances. If you obtain a new credit card that offers a promotional 0% or low-interest rate on balance transfers, you might be able to transfer the balances from your existing credit cards. This move would consolidate your debt into one place, and, during the promotional period, you won't incur additional interest charges on the transferred balances. However, despite the no-interest promotions, many credit cards do charge a fee for balance transfers–typically a percentage of the amount transferred. Plus, you can’t forget that the interest rate will kick in after the initial promotional period is over, and that interest rate may be even higher with the ones you were struggling with on the original credit cards! It’s important to have a plan in place to pay off the debt before the new interest rate begins to apply to your balance.

As a last resort, one can declare bankruptcy, which is a legal process that allows individuals and businesses to seek relief from overwhelming debts and obtain a fresh financial start. This is typically only done when other options for managing debt have been exhausted. There are two types of bankruptcy–Chapter 7, is the most common form–and Chapter 13. Chapter 7 involves the liquidation of non-exempt assets to pay off debts, and many unsecured debts (e.g., credit card debt, medical bills) can be discharged thusly. On the other hand, Chapter 13 allows individuals with a regular income to create a repayment plan to pay back their debts over three to five years–and, you can keep your assets. Again, both types are meant to be used as the very last resort. Bankruptcy will remain on your credit report for several years, affecting your ability to obtain credit in the future, so it is not a step to be taken lightly. Declaring bankruptcy is a serious decision, and it can involve a lot of nuance. We highly recommend that, if anyone is considering going that route, they talk with a bankruptcy lawyer or other specialist. Our summary is meant only to provide general background and information.

However, there is a newer option available to pay down your debts that you may want to consider. Unison pioneered the equity sharing agreement, and has helped over 10,000 homeowners tap into their equity in order to live the lives they want–including to break free of debt!. With Unison, you can access up to 15% of your home’s current value with zero interest or monthly payments, in exchange for an agreed upon percentage of your home’s future change in value at the end of the agreement–typically in 30 years or at the time of sale. Instead of exchanging several monthly payments for a single, enormous monthly payment, imagine the monthly payments disappearing altogether! If that sounds like a good fit for you, you can get a free estimate today, with no obligation or effect on your credit score.

Adjust Your Lifestyle

While we already discussed making conscious spending choices and cutting unnecessary expenses, it’s important to emphasize the fact that, once you’ve discharged your debt, if you don’t change your habits, you may find yourself back in the exact same situation. If you think you will struggle to adjust your lifestyle accordingly, you might need to consider more ways to supplement your income like starting a side-gig or getting a part-time job. It may be time to ask for a raise, or even sell an asset. If you live in a big city, for example, you may be able to sell your car and rely solely on public transportation instead.

The debt-free journey is a long one. In order to stay committed, you should celebrate milestones and develop forms of positive reinforcement. It might also be a good idea to enroll in credit counseling; there’s no reason you have to undertake the mission alone. While transforming our lives is never easy, it is often worthwhile. Don’t give up!






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