Step 1: list all your debts
Before deciding anything, write down every debt with these details:
- Outstanding balance still to pay.
- Interest rate (APR).
- Minimum monthly payment.
- Expected end date.
Include money you owe to family or friends too: there’s no interest, but it still has to be repaid. Seeing the total for the first time can be daunting, but it’s the essential starting point.
Step 2: always make the minimum payments
Missing a payment leads to late fees, extra interest and, in some cases, a mark on your credit file. The first rule is that every minimum payment is covered in your budget.
Step 3: choose a method for the extra money
Anything you can pay above the minimums should go towards a single debt. There are two classic methods:
The snowball method
You order your debts from smallest to largest and put the extra money towards the smallest. Once it’s paid off, you add the payment you were making to the next one, and so on. Advantage: you see results quickly, which keeps you motivated.
The avalanche method
You order your debts from highest to lowest interest rate and put the extra money towards the most expensive one. Advantage: you pay less interest overall and finish sooner, although the first debt may take longer to disappear.
Which one to choose
If you struggle to stay consistent, start with the snowball. If your plan is clear and you want to save as much money as possible, choose the avalanche. Either is far better than spreading the extra money across all your debts.
Step 4: find money to speed things up
- Review your budget and put whatever you cut from subscriptions or eating out towards your debts.
- Use bonuses and one-off income to make early repayments.
- Ask your bank whether the interest rate can be lowered or whether consolidating would be cheaper, but check the fees and the total term carefully.
Step 5: don’t take on new debt
While you’re paying off, avoid financing new purchases and only use your credit card if you can clear it at the end of the month. A small emergency fund will help you avoid borrowing again when something unexpected happens.
How Calers helps
In Calers you record each debt with its total amount and dates and link it to a category: every payment you record in that category reduces the outstanding balance automatically, and you see the percentage paid off. If you schedule the payments, they appear in the right month and are included in the balance forecast, so no payment catches you off guard.
Do it with Calers Debts and loans What you owe and what you’re owed
