There are times when just meeting your financial needs will leave you with a tremendous amount of debt. When it comes to repaying debt and properly managing your finances, you have plenty of options available to you. The best way to repay debt involves focusing almost exclusively on higher-rate debt and gradually working your way to lower-rate debts. Keep in mind that all debt need to be paid, but keeping the lower-rate debt to the minimum amount and channeling remaining funds to the higher-rate debts will help you get out of debt quicker.

Once you list your complete debt amounts, you will know exactly how much you need to repay. Arrange the debt amount in an ascending order, from the smallest to largest. Having done this, make a list of the creditor’s name, owed amount, interest rate and minimum payment. Put the highest interest rate first and then work towards the lowest.

With the completed list before you, determine how much you need to repay to all of your debt on a monthly basis. This means adding up the “monthly minimum due” column. Balance this amount against the funds you have available each month to pay toward your debt. Hopefully, you still have money left over. This amount should then be allocated to the top creditor (i.e. the one that charges you the highest rate). It makes no sense to spread out this extra amount – direct this extra money to your top priority.

One vital element to personal finance management includes putting funds aside in a savings account. However, if you have a large debt load it does not make much sense to save aggressively unless your savings yield greater returns than what you are paying in credit debt (unlikely). Still, even $10 of savings every paycheck will accumulate a surprising balance. This is particularly important when it comes to making lump sum payments against debt or having an emergency reserve for gifts and to satisfy an unplanned urge to splurge.

As a last resort, consider borrowing money from family and friends to repay your higher interest debt. Since money from such sources is normally interest-free, you can repay such loans without having to worry about how much you are “giving away” to creditors who charge (much) higher rates.

For people with higher debt, the debt repayment plan will progress at a much slower pace. This is especially important to realize when it comes to staying on track with your plan, as you will likely get discouraged after making months worth of payments and seeing very little damage being done to your overall debt load. Keep in mind that once you start repaying debt, you will notice an almost-immediate improvement to your personal financial situation. And, within months, your credit score will echo your success.

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