28 Jun A Debt Repayment Plan Template

Deciding how to pay your debt can be tricky, especially if you have so much that you feel like you just don’t know where to start. Luckily, Debt Refinance has put together a few handy debt repayment templates you can use to pay off your debt in ways that are both gratifying and stress-relieving.

We’ll cover two methods in detail and with example templates: the debt snowball method and the debt avalanche method. Then, we’ll relate them to a consolidation loan and how you can use this sort of personal loan to make debt repayment mentally and financially easier. Let’s dive in!

Ways to pay off debt

There are tried and true methods people all over the world use to pay their debt: the avalanche and snowfall methods.

The avalanche method

The avalanche method tackles debt by addressing the highest-interest debts first. So for instance, if you have a debt with 15%, 20% and 28%, you would start paying the debt with 18% first. Then, you would pay the 20% one, then the 15% one.

The avalanche method is good for saving money in the long run, as you’ll pay less interest over time. It may take a while to pay debts off using this method if your principal is large, but it’s good to use if you’re not looking for the quick gratification the snowball method provides.

The snowball method

The snowball method works by fending off the smallest debts first. It’s a great method to use if you need motivation to pay debts– it’s gratifying to see debts paid. Say you have a R3 000, R7 000, and R11 000 debt. You would pay off the R3 000 debt first, then R7 000, then the R11 000 one.

Snowball and avalanche method repayment plans

Now that you understand what the snowball and avalanche methods are, you can use them to create debt repayment plans.

Snowball method

Here’s how to use the snowball method to make a repayment plan.

• Make a list. Organise any payment information, the total amount owed, minimum monthly payments and due dates.
• Sort them out. Arrange your list of accounts from smallest to largest Rand amount owed.
• Budget beyond the minimum. Determine how much extra you can afford to put toward the monthly minimum payment for your smallest debt, after paying the minimum payments on all of your other outstanding debts. Remember, if you do not have enough for even the minimum on each of your debts, it can hurt your credit score.
• Roll payments over as you make progress: When you’ve paid off the smallest debt, take the money previously used — the monthly payment and the little extra you budgeted — and put it toward the next-smallest debt.

Next, let’s discuss the avalanche method.

The avalanche method

Use this list to pay debts with the avalanche method.

• Make a list. Organise any payment information, the total amount owed, minimum monthly payments and due dates.
• Sort them out. Arrange your list of accounts from the highest interest rate to the lowest interest rate on each bill.
• Budget beyond the minimum. Determine how much extra you can afford to put toward the monthly minimum payment for your highest interest rate account, after paying the minimum payments on all of your other outstanding debts. Remember, if you do not have enough for even the minimum on each of your debts, it can hurt your credit score.
• Roll payments over as you make progress: When you’ve paid off the account with the highest interest rate, take the money previously used — the monthly payment and the little extra you budgeted — and put it toward the next-highest interest rate account debt.

With a consolidation loan, you can skip the first two steps on the avalanche and snowball method. That’s because you’ll only have one easy monthly payment to make with an already low interest rate. Managing only one loan with a lower interest rate and lower monthly repayments can also provide peace of mind and improve mental health.

If you would like to discuss paying off one lower, simplified debt each month, contact Debt Refinance.