Once you decide on how to prioritize your debt, it’s time to decide your strategy.
Let’s say you went with strategy to pay off the lowest balance first and that:
- A Student Loan has the lowest balance – $4900.00 – with a $25.00 payment.
You need to determine how much to add to that payment.
Let’s say you decide to add an extra $50 a month to that payment, making it $75.00 a month instead of $25.00 a month.
By applying the extra $50 a month, you decrease the balance faster.
- Once the Student Loan if paid off – you would then add the total amount you were paying on it ($75.00) to the next lowest balance, which in this example we’ll call Card # 1.
So if Card # 1 minimum due is $180.00, you would add the $75.00 from the paid off student loan.
Now Card #1’s payment is ($180 + 75) $255.00.
- Once Card # 1 is paid off you would add the $255 monthly payment to the next lowest balance, in this example Card # 2.
- You keep doing this until all debts are paid.