We explore below different debt payoff methods for paying off debt systematically.

• Interest rate as a filtering method

In this, the debt repayment method includes the avalanche method. In this strategy, you must rank your debts from the highest to the lowest by interest rate. The outstanding balance slowly reduces and the overall interest payouts reduce over time. Make sure that you make all minimum payments on all outstanding debt to avoid default status. In the debt avalanche method, the progress is faster as the high interest debt is paid first. 

• Outstanding debt balance as a filtering method. 

The recommended method is the snowball method for debt repayments. You pay off all the small balances of debt before progressing onto the higher debt balances. Debt slowly whittles down by this method to a more manageable balance. All smaller debts are progressively paid off before you move onto the next one.  This method requires patience and resolute determination as it takes time before your outstanding debt reduces enough to make a dent.

• Integrating debt into one payment

Debt consolidation is a method where all your debt balances are consolidated into one single outstanding balance. This makes it more manageable to track repayments and prevents defaults and delinquencies. Along with debt integration,  the terms become more favourable for you if you can if you are able to negotiate with lenders for lower interest rates. Paying off credit card debt must be a priority. This also covers balance transfers on credit cards. Remember that you may incur some charges to achieve debt consolidation or balance transfer.

• Planning the debt repayment steps

Creating a financial budget and devising a plan of action

Budgeting for debt repayment is the first step. Make a complete listing of all your debts that have an outstanding balance and ranking them by interest and balances. List all the interest rates, minimum balances and billing periods and payment dates to have a complete listing. Your budget must also list all your primary and alternative sources of income. Collect all physical statements and records that support your budget. This helps you to create an effective  debt repayment plan. 

• Create an updated budget

Tally all monthly income and expense payments. Slot the debt repayments and interest payments against the surplus balance in your budget. Filter your expenses into essential and discretionary to enable you decide which ones to pay. Try to cut down on extraneous spending so that more funds can be channelled towards debt payments. Try to avoid impulse buying as it vitiates your debt repayment strategy.

• Allocate your income according to your debt repayment plan

Use one of the methods to analyse which debts to pay first. Paying off more debt is always a good strategy to reduce your overall debt balance steadily. Ensure first that you meet your essential living expenses and create an emergency reserve before directing our savings to the debt repayments. Create an effective debt management plan which at least provides for minimum repayments to avoid delinquencies and defaults. After meeting all the debt repayments and interest payments, direct any remaining balances towards building up your corpus of savings.