Finding The Best Debt Free Plan For Your Family

Did You Know?

Dumping unnecessary and high interest debt is not always easy, but it can have a real impact on your finances and life.

According to a survey done by Experian, they found that 75% of Americans who have a credit card carry a balance month-to-month.¹ The average balance is just over $5,000.

While we may be driving less now, that doesn’t mean car loans have gone away. The average balance on car loans is just a smidge under $20,000.

Finally student loans are on the mind of many, with talk of some federal loans being forgiven. With the average balance last year being $38,792, it’s a concern for many families.

Creating a Debt Free Plan

With businesses opening up more and the vaccines being rolled out, some families are looking to get back to their pre-pandemic plans, including paying off their debts.

The first struggle many have with their debt free journey, though, is figuring out the best method for tackling it.

Debt Snowball or Avalanche?

One of the best ways to build your debt free plan is by looking at what has worked before.

Two of the most popular ways to knock out debt is the debt snowball and avalanche. Millions have used these plans to systematically pay down and eventually pay-off their debts.

How do they work?

With the debt snowball, you’re focused on paying your debt down from smallest balance to largest. The reasoning behind this is that those early wins give you a psychological boost that propels you to continue with the plan until you knock all your debts out.

The debt avalanche, however, is geared so that you pay down your debts from highest interest rate to lowest. This can be appealing for those who have high interest debts that are looking to escape them first.

Why They Both Work

While the order may be different with the debt snowball versus avalanche, the process is almost identical.

With both methods, you are paying the minimum on all of your debts except for one. When that one is paid off, you then move to the next, building up those payments as you knock each debt down.

I believe these work precisely because you are honing in your payments one debt at a time.

It’s frustrating to send a little extra on your credit cards and see no real progress. By focusing all your extra money into that one debt, though, you have a higher chance of making a dent and knocking it out.

Second, these pay off methods are focused on you committing to the plan. This mindset shift and buy in is necessary, especially if you have a significant amount of debt.

The great news is that you open up so many options with your budget and more when you pay off those high interest debts. That money can now be used for goals that really matter to you.

Now the tough part - deciding what method is best for you.

How to Choose the Best Debt Payoff Plan

The key to the best system is that it’s one that you stick with. Consistency with your payments is crucial.

So you should start by examining your debts, how you handle your finances, and your timeline.

If you’re the type of person who enjoys crossing things off your list quickly, then the debt snowball can be a wonderful fit.

However, if you’re not thrilled with the crazy rates you’re paying or you want the shortest timeline, then the debt avalanche may appeal to you.

Setting Up Your Debt Free Plan

Now that you have a general outline of your plan of attack, it’s time to put it to work.

Second, if you do have quite a bit of high interest loans, you should consider refinancing those loans.

When crafting their debt free plan, David and John used balance transfers to consolidate debt and temporarily reduce interest rates. That meant more money was going to knocking out their actual debt.

As a Coastal member you may qualify for a personal loan that allows you to save some significant money on interest payments.²

With Coastal, you have a partner that helps you live better by banking better!