For many people, debt can inch upward slowly, especially if there are multiple types of accounts involved, like lines of credit, loans, and credit cards. For others, a major event – such as a health emergency or unexpected home repair – can throw a careful financial plan out of whack.
No matter where you are with loans, getting a handle on your accounts is a great first step toward learning how to pay off debt.
Jump-start your debt reduction
As a starting point, fill out Cobalt CU’s debt obligations worksheet to begin documenting your loans, debts, and associated interest rates and fees. Before you fill out the sheet, gather your loan information. The data you’ll need includes:
- The type of debt. Think about all accounts, such as your mortgage, medical debt, student loans, lines of credit, and credit cards. Also note any informal loan obligations, such as borrowing money from a relative.
- Current balances and minimum payment amounts. Your goal should be to try to pay more than the minimum every month, but it’s important to know your baseline.
- Interest rates and annual fees. This is a good time to check the fine print on your credit card agreements to find out if you’re in the middle of any promotional periods. Some cards offer a low interest rate for a certain period of time, such as six months, and then reset the interest rate after that.Also be sure to check whether the interest rate is different for new purchases than it is for older balances. This can happen with credit card promotions that encourage transferring balances from another card.
Once you’ve tracked down the necessary data, enter it into the debt overview worksheet. When you have it all in one place, you’ll get a better idea of your debt status.
You’ve taken the first step
Getting your debts on paper can help you get a full picture of your obligations and help you decide how to best address them. Also, having a worksheet that compiles your debts can be useful if you decide to secure a personal loan for debt consolidation or to talk with a credit union advisor about different strategies for paying down debt.
The next step is to determine which accounts to address first and how much of your budget you can allocate to paying off debt. (For more information about debt and strategies and tips for paying it off, see the free Cobalt CU Debt Management Guide.)
Then it’s a matter of sticking it out and being patient. Particularly if you have a lot of debt, this last part can be frustrating, but now that you’ve taken the first important steps in learning how to pay off debt, make a commitment to stick to your plan. You owe it to yourself.
Have you conquered debt? Share your tips in the comments section.
Get started by downloading your copy of the debt overview worksheet today!