So, Which Debt Repayment Strategy Is Right for You?

If you’ve reached the point of comparing debt repayment strategies, you’re already off to a great start. Half the battle is acknowledging the extent of your debts. Once you have an idea of how much and what kind of debt you need to eliminate, you can start figuring out which tactics will serve you best.

Keep reading to discern which debt repayment strategy is right for you.

Do-It-Yourself Debt Repayment

If your debts are manageable enough to tackle on your own, you’ll at least need a plan to expedite the process. There are two primary schools of thought here on how to handle do-it-yourself debt repayment: snowball vs. avalanche. Keep in mind it’s important to pay the minimum balance on all your accounts even while you’re prioritizing one at a time.

The debt snowball method advises paying off your smallest debt first. Then snowballing those funds as you move up the line, finally tackling your largest balance. You’ll gain momentum as you go and the psychological boost of racking up some small victories right away will help keep you engaged.

The debt avalanche method advises paying off your debts from highest to lowest interest rate, regardless of balance amount. The advantage here is you’ll save the most money in interest payments. 

Debt Management Plan (DMP)

The first step in figuring out if you’re eligible for a DMP is meeting with a credit counselor. This advisor will review your budget and financial situation, then help you determine whether a DMP may be a good fit.

Enrolling in a DMP means you’ll make a single monthly payment to the credit counseling agency, which will then pass those funds onto creditors to cover your obligations. The agency may be able to negotiate more favorable interest rates and get fees reduced or eliminated.

You can expect a DMP to last approximately three to five years. During that time, you’ll have to refrain from using credit cards or opening new lines of credit.

Debt Consolidation Loan

If your credit is in relatively good standing and you’re hoping to streamline your debts, taking out a debt consolidation loan may prove to be advantageous. It tends to be simpler and less expensive to make one monthly payment on a loan at a reasonable interest rate than, say, five monthly payments on five high-interest credit cards or medical bills.

Banks, credit unions and private online lenders offer consolidation loans — the key is calculating whether you will actually save on interest over the course of the loan. It’s also important to accept a consolidation loan only if you can commit to making regular payments, on time, for years to come. Defaulting on a consolidation loan will leave you in hot water once again.

Debt Relief Program

Debt relief is an option for consumers facing serious debt — think $10,000 or more — who would like to avoid the consequences of bankruptcy if possible.

If you enroll in a debt relief program, also known as settlement, you’ll make monthly deposits into a special account until you have saved up a certain amount. Then professional negotiators will reach out to your creditors one by one, trying to get them to accept a percentage of your original balance. Creditors will often agree if they fear you’ll default otherwise. You’ll pay the debt relief firm a percentage of each successfully settled account.


Think of bankruptcy as a last resort rather than a fresh start. Why? Because the fact you filed for bankruptcy will show up on your credit report for seven to 10 years. You may also have to liquidate some of your assets. However, if you are truly drowning in debt, bankruptcy may be the only option you have left to wipe the slate clean and start rebuilding your financial stability brick by brick.

Only you can determine which debt repayment strategy is right for you, so keep researching and asking questions until you have a winner.