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How to make a debt payment plan

Back to financial educationCredit & debt, Credit cards, Money

Mother going through bills with daughter

Being in debt can feel overwhelming, especially if you owe a lot of money. Thankfully, there are strategies that can make it less stressful to pay off your debt. All you need to get started is a debt payment plan.

An effective debt payment plan can help you get out of debt faster and keep you motivated throughout the process. By sticking to your plan, you’ll be on the path to living without debt.

In this article we’ll show you how to create a debt payment plan and put it into action.

Here’s what we’re going to cover:

  • What is a debt payment plan?
  • Method one: Paying off your debts one by one
  • Method two: Consolidating your debts
  • More strategies for success

Key takeaways

  • Getting out of debt can be easier when you plan your strategy. An effective debt payment plan could help you pay down your debts more quickly.
  • One method is to make a list of all your debts, then put them in the order that you’d prefer to pay them off. Then you pay down your debts one by one until they’re all crossed off the list.
  • Another method is to consolidate your debts by transferring them all to a single loan or credit card. Then you have just one debt payment to make each month until you’ve paid down your debts.
  • You can get out of debt faster by increasing your monthly payments, finding extra income, and reducing your expenses.

What is a debt payment plan?

A debt payment plan is a strategy to help you get out of debt.

When you create a debt payment plan, you look at the total amount of each debt, as well as the minimum monthly payment for each one. Then you can decide which debts you want to pay off first. Or you might prefer to consolidate all your debt into a single account, so you have just one payment to make each month.

Here are two approaches to creating an effective debt payment plan.

Method one: Paying off your debts one by one

With this approach, you organize your debts and decide on a payment order. Then you pay them off one by one until you’re free of debt. Remember, you need to continue to make the minimum payment on the other bills to avoid paying late fees or becoming delinquent.

Make a list

To begin, you’ll want to list all your current debts. You can do this on paper, or you may find it helpful to use a computer program like Google Sheets or Excel. You can choose the system that feels most comfortable to you.

Your list should include any debt you currently owe, such as:

  • Credit card balances
  • Student loans
  • Auto loans
  • Mortgages
  • Personal loans
  • Medical bills
  • Money borrowed from family or friends

As you write down each debt, make sure you include the total amount still owed, the interest rate, and the minimum monthly payment required. You can find this information by looking at your account statement or by asking your lender.

Choose an order

Now that you have all your debts listed in one place, it’s time to put them in the order that you want to pay them off. Here are two popular strategies you may want to consider.

With the avalanche strategy, you pay off your debts in order from the highest interest rate to the lowest interest rate. This allows you to save the most money on interest while you’re getting out of debt.

What is interest?

Interest is the amount of money you pay your lender to borrow money. This is in addition to paying back the original loan amount.


With the snowball strategy, you pay off your debts in order from the smallest balance to the largest balance. This allows you to experience the feeling of success as soon as you cross that first debt off your list. This sense of accomplishment can motivate you to keep going until all your debts are paid.

You don’t need to stick with either strategy for the entire debt repayment process. For example, you could start with the snowball strategy and switch to the avalanche strategy later if you prefer. The most important thing is to stay committed to paying off your debt.

Method two: Consolidating your debts

Are you feeling overwhelmed by the number of debt payments you have to make each month? If so, you may want to consider debt consolidation. This is the process of grouping all your debts into a single account.

Here’s how it works. Suppose you owe money on a credit card, an auto loan, and a personal loan. By taking out a debt consolidation loan, you can pay off all three accounts in full. Then you owe only one debt payment each month—the new loan.

You may find that debt consolidation makes paying off your debt less stressful and more manageable. Here are two ways you can consolidate debt.

Debt consolidation loans

A debt consolidation loan is a personal loan you use to pay off all your debts. Then you’ll only have one loan payment to make each month.

Debt consolidation loans may also come with lower interest rates than credit cards. A lower interest rate allows you to pay less money in interest while you’re getting out of debt.

Balance transfer to your credit cards

A balance transfer to a credit card is another popular choice for debt consolidation.

Some balance transfer offers from credit cards come with an introductory period when you don’t have to pay any interest. By transferring your entire debt to this card, you can take advantage of the zero-interest period, which typically lasts between 12 and 20 months. This will allow you to save money on interest while you’re paying off your debt.  However, you should consider if there are any balance transfer fees that can increase the amount you owe.

More strategies for success

Once you’ve chosen a method for debt repayment, there are several ways you can make the process easier and faster. Each time you pay off another debt, you‘ll be one step closer to financial freedom. That’s a goal worth working toward.

Increase your payments

Be sure to include the minimum payments required for all your debts in your monthly budget.

To get out of debt faster, you may want to increase the size of these payments. Can you afford to do this? Here’s a quick way to calculate how much extra money you can put toward your debts each month.

  1. Add up the minimum monthly payments for all your debts.
  2. Add up all your regular monthly expenses (rent, utilities, gas, food, etc.).
  3. Subtract these two amounts from your monthly income.
  4. See how much money is left.

If you have money left after all your bills and expenses are paid, you can decide if you’d like to increase your debt payments, and by how much. Paying more than the minimum amount each month will help you get out of debt faster.

Look for extra income

Another way to speed up the process is to earn some extra money. You might do this by starting a side hustle or applying for a second job. Having additional income can help you pay off your debts and reach your financial goals more quickly.

Reduce your expenses

You can also get out of debt faster by reducing your spending. For instance, you could cut back on food expenses by shopping in bulk at the grocery store. Or you could pay less in rent by downsizing to a more affordable apartment. Every dollar you save with these changes can be used to help you get out of debt.

Oportun: Affordable loans for debt consolidation

Oportun: Affordable lending options designed with you in mind

Now that you understand , you can learn about how Oportun can help you.  If you are looking for affordable credit options, we can help.  Visit our homepage to learn about:

  • Personal loans
  • Credit cards
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Experian. The debt avalanche method: How it works and when to use it

Experian. Debt snowball strategy: How does it work?


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