How to Create a Credit Card Payoff Plan
- Credit card payoff plans can help you get out of debt faster.
- No plan will work if you keep overspending.
- Debt settlement can help if you can't afford your credit card payments.
If you’ve decided it’s time to pay off your credit cards and get rid of that debt, then that’s a great start to a brighter financial future. But if you’re serious about tackling debt, you need to come up with a clear and achievable credit card payoff plan. After all, every important goal in life requires an understanding of what you’re up against and a clear path to victory.
You can create a step-by-step plan to tackle credit card debt on your own, by using a credit card payoff calculator or app, or get to your goal with help from professionals.
Organizing a credit card payoff plan
Developing a payoff plan for your credit card debt can be tough if you don’t know where to start. To make it easier, we’ve broken it down into manageable steps. Here’s how to create a credit card payoff plan when you have a specific debt-free date in mind:
Determine how much you owe
Gather together all of your credit card bills and add up how much you owe in total. This number may be larger or smaller than you expected, but it’s important to be accurate.
Calculate your new monthly payments
Next, divide your total debt amount by how fast you want to get out of debt. For example, if you intend to pay everything off within a year, divide your total debt amount by 12. The number that you end up with will be approximately what you need to pay each month in order to get out of debt. You may be left with a small balance at the end of the repayment period, but it’s important to pay more than the monthly minimum payments.
Make necessary adjustments
You may want to adjust this payoff plan based on your budget and how much you can afford to pay each month. It may take you longer than you initially thought, or you might be paying more each month. Before you commit to a plan, make sure your budget can handle it.
Pay off your debt
Focus on following through on your plan until you get out of debt. Don’t fall into the trap of paying off one card with another. Avoid taking on additional debt and pay close attention to your spending. Try to stay conscious and goal oriented so that your payoff plan doesn’t get derailed. If it does, do your best to get back on track as quickly as possible.
Consider alternative payoff approaches
If you aren’t able to pay a consistent amount each month according to your credit card payoff plan, there are other proven approaches, such as the “debt avalanche” or “debt snowball” methods. These debt payoff methods could get you out of debt faster, without being tied to a specific monthly payment amount.
Using a credit card payoff calculator or app
Many people find online credit card payoff calculators helpful. Websites such as Credit Karma have debt payoff calculators where you can plug in your information and find out how long it will take you to get out of debt. This is a useful tool for figuring out how much you can afford to pay each month.
While these calculators factor in your current debt and minimum payments, they may not help you create your own credit card payoff plan. That’s where debt payoff apps may help; they can actually set you up with a plan to get out of debt faster by helping you track your payments and keep you on schedule.
These apps allow you to keep all of your debts in one place and easily track your progress, even sending you alerts when it’s time to pay your bills. Instead of just doing it on your own, a debt payoff app can walk you through what you need to do in order to become debt-free.
How to get help creating a credit card payoff plan
Debt payoff calculators and apps can be especially helpful, but neither will necessarily deal with the root of your debt problem. If you’re overwhelmed with debt, there are professionals who will work with you to develop a different type of credit card payoff plan. Specifically, either a credit counseling or debt settlement program might be right for you.
Credit counseling can help you develop the skills you need to tackle debt on your own. If you’re not sure how to go about paying off your debt, working directly with a credit counselor could clarify much of that for you. A credit counselor will look at your situation and try to determine the best course of action.
If you’re in a significant amount of debt, credit counseling agencies may offer you a debt management plan to help you organize your finances and get out of debt for good. With a debt management plan, your credit counseling agency will work with your creditors to renegotiate the rates and terms of your accounts (such as lower interest rates) and set you up with a new payment schedule.
A debt management plan typically lasts between 30 and 60 months, depending on your level of debt and your budget. Although you’ll have to pay a fee for credit counseling services, it may end up saving you on interest payments in the long run.
If you’re dealing with more than $7,500 in debt and are having difficulty keeping up with your current monthly minimum payments, then debt settlement (also called debt relief) may be right for you. With debt settlement, you begin by stopping payment to your creditors and saving this money into an account. Once you have enough money saved, the company starts reaching out to your creditors to negotiate payment on the debt, often a lower amount than you originally owed. This is sometimes called a settlement.
Debt settlement could save you money and get you out of debt in as little as 24 to 48 months. But in order to qualify, you need to show that you got into debt because of a financial hardship, like divorce, job loss, or other circumstances that leave you unable to pay your debts.
Whether you choose to put together a credit card payoff plan on your own, enroll in credit counseling, or get help with a debt settlement company, you’ve already taken the first and most important step in paying off your credit card debt simply by educating yourself about your options.
Get help with your credit card payoff plan
If you’re concerned about debt and falling behind on payments, it might be time to take control of your situation. Freedom Debt Relief is here to help you understand your options for managing and eliminating debt, including our debt relief program. Our Certified Debt Consultants can help you make a good choice that can put you on the path to a better financial future. Find out if you qualify right now.
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