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Solutions to Pay Off Debt

Solutions to Pay Off Debt
Betsalel Cohen
UpdatedFeb 28, 2024
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    6 min read
Key Takeaways:
  • Make a plan to pay off debt and increase your financial security.
  • Chart out your debts, assets, and income.
  • Match the right debt plan for your financial situation.

Pay Off Debt: Make a Plan and Do It!

No matter whether you are deeply in debt or just starting to get into debt, you should make a plan to pay off your debt. Being in debt is stressful. Putting together a plan to pay off debt reduces your stress and puts you on the path to financial security.

Here is a three-step plan to pay off debt:

  1. List all your debts.
  2. Chart out your assets and income.
  3. Choose a debt reduction tactic.

The tactics you should use to pay off debt are different if you are in a strong financial position or if you are in a weak financial position.

Not all Debt is Bad: Healthy vs. Unhealthy Debt

Not all debt is bad. Loans and debt that help to increase your overall financial position are healthy debt. Mortgage loans and student loans are both examples of healthy debt.

Unhealthy debt allows you to live beyond your means, but it is like a time bomb. Once you get behind in payments, your immediate quick-fix solutions are expensive. If you are not careful, the debt cycle will lead you to default, lawsuits, and collection judgments. Credit card debt and payday loans are two examples of unhealthy debt.

Step 1: Chart Out Your Debt

Begin by making a list of your debts, separating healthy from unhealthy debt. Fill out a chart like this:

My Healthy Debt
Type of DebtBalanceInterest RateMonthly PaymentNumber of Payments left
My Unhealthy Debt
Type of DebtBalanceInterest RateMonthly PaymentNumber of Payments left
Credit Card 1
Credit Card 2
Personal Loan

Step 2: Chart Out Your Sources for Repayment

Make a list of all your potential sources for repayment, including the following assets:

AssetEstimated ValueNet Value After Loans
Savings Account
Investment Account
Retirement Account

Make a list of your income, as follows:

SourceMonthly Gross IncomeMonthly Net Income
Borrower 1 Wages
Borrower 2 Wages
Investment Income

In order to complete the picture, complete a full budget. provides you with instructions on how to prepare and maintain a budget.

Step 3: Choose the Best Debt Reduction Tactics

Once you have a snapshot of your financial position, find the best tactic(s) to pay off your debt. Remember to keep in mind your short-term goals:

  1. Pay off your loans quicker.
  2. Consolidate your unsecured debt.
  3. Reduce your stress.

Although a bit oversimplified, try to place yourself in one of the two categories: Strong or Weak financial position. No matter what your financial position is, you can find good tactics to help pay off debt. Always, budget and spend what you earn and can afford.

Plan A: Good Financial Position — You can afford your payments and Have strong assets

Choose between one of the following tactics:

  • Accelerate your payments: If you have sufficient income, consider making larger payments on your debt. Make accelerated payments on your mortgage, either automatically each month, or through lump sum payments.
  • Optimize your payments: Avoid making minimum payments on your credit card debt. Apply extra funds to pay off your highest interest or your lowest balance cards.
  • Refinance your mortgage: If you have equity in your house, consider a refinance or a cash-out refinance. By reducing your interest rates, you will be saving on your financial costs. Be sure to check the bank fees. In order to pay your debts off faster, reduce the term of the loan. If you have 20 years left, consider taking a 15-year loan. Take a cash-out refinance to pay off other debt, such as credit card debt. However, plan the payments appropriately so that you do not increase your overall debt load. Avoid taking out new credit card debt.
  • Take a personal loan to consolidate debt: If you have built up high interest loans or debt consider a personal loan to consolidate your debts. If your credit score and history are strong, then personal loans can be a good alternative to expensive credit card debt. A good place to start looking for a personal loan is with your bank or credit union. Shop around and make sure that by taking a personal loan you will be retiring at a lower interest rate and faster pace, unhealthy debt. If you have a number of student loans, then student loan consolidation is a good way to lower your interest rates, simplify your payment schedule, and shorten the payment term, so you pay off your debts for a lower total cost.

Plan B: Weak Financial Position — Cannot afford monthly payments and weak asset position

You are undoubtedly under stress and think that your options are limited. After all, you don't have any assets to pay off your debt, nor sufficient income to meet your minimum required payments. However, you can use some good debt relief tactics, including the following:

  • Sign up for Credit Counseling and Debt Management: A credit counseling program will review your budget and financial situation with you. Your credit counselor may recommend that you enroll in a debt management program (DMP). You will enroll your credit card debt into the program and pay it off within a 4-5 year period. You make all your payments to one company that funnels the funds to your various creditors. You pay back 100% of your debts. In general, you need to stop using your credit cards for this approach to work. This type of program helps you pay off unhealthy debt and avoid late payments that would harm your credit history. You pay an upfront and monthly fee.
  • Sign up for Debt Settlement: If you are deep in debt, especially credit card debt, then consider enrolling in a debt settlement program. You choose to stop sending payments to your creditors and send money, instead, to a bank account that is under your control. Once a successful agreement is reached, the creditor will be paid, usually for substantially less than the amount you originally owed, Make sure to hire only a settlement company that does not charge you a fee before an account is settled.
  • File for Bankruptcy: If your financial picture is extremely bad, consider filing for bankruptcy. A chapter 13 bankruptcy is a form of paying off debt, with a court supervised payment schedule. Consult with an experienced bankruptcy lawyer, to see if filing bankruptcy will help you.
Quick tip

Contact one of's pre-screened debt providers for a free, no-hassle debt relief quote.

Summary: Putting Together a Plan to Pay Off Debt offers you more articles, advice and tools about the various tactics you can use to pay off debt. No matter what your financial situation, or which tactic you choose, it is up to you to make a plan and stick with it. Getting into debt is easier than getting out of debt. However, by following the three steps in the article, you can improve your financial situation and make your plan work.

Debt statistics

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Housing debt totaled $12.612 trillion and non-housing debt was $4.891 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

The amount of debt and debt in collections vary by state. For example, in Tennessee, 32% have any kind of debt in collections and the median debt in collections is $1892. Medical debt is common and 18% have that in collections. The median medical debt in collections is $888.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.