Portland Community College | Portland, Oregon

Getting out of debt... it takes time!

It may seem like your debt happened overnight, but getting out from under debt usually takes time and planning. Make a spending plan that covers your necessities first, and then start paying off debt. If your income is not enough to pay for necessities such as housing, food and transportation then it time to either increase your income (through work, selling possessions, obtaining scholarships) or decrease your spending on non-essentials.

Once you have an income that covers your basic needs, you can start paying down debt.

Debt payment methodology

There are a few methods to paying off debt, here are two!

Highest Interest to Lowest Interest

First, add up all your debts including the minimum payment, interest and total amount to pay it all off. Order your debts from the highest interest rate to the lowest rate.

Now, pay off the loan with the highest interest rate first, making larger-than-minimum payments. Continue paying minimum payments on the rest of your debt.

Once you have paid off the first loan, then work on the loan with the second highest interest rate by paying larger-than-minimum payments. Keep on going until you are debt free!!!

You can take years off repayment of a loan by making larger-than-minimum payments.

Snowball Method

Pay your debt off in order of the lowest balance due to the highest balance due.

Start by paying larger-than-minimum payments to the debt with the lowest balance while making minimum payments to the other debts. Soon you will have paid off the first debt completely! Then move on to the debt with the next lowest balance. Keep on going until you are debt free!

This method from Dave Ramsey helps you earn early victories in your debt repayment and keeps you motivated.

Did you know...

If your total debt (not including housing or college loans) is equal or more than your projected earnings for 5 years, it is time to get expert advice. The National Foundation for Consumer Credit can direct you to a certified non-profit debt consolidation service. You may be able to find a way to pay off your debts through debt management or be advised as a last resort to consider bankruptcy. Avoid scam companies claiming to settle your debts for a fraction of the cost. If it seems too good to be true, it is!