How to repay your debt

If you’re feeling under pressure with your monthly debt repayments, you’re certainly not alone. It’s time for a repayment plan.


Small, consistent changes can help you take control and, as you stick with your plan, your progress will get faster.

Wondering how to get started? Here’s your step-by step guide.

  1. Stop creating new debt. By not using any more credit, the amount you owe will start to decrease with time as you pay your monthly instalments. If you keep creating new debt, you’ll never become debt-free. So this is an essential first step.
  2. Know what you owe. Make a list of all your credit accounts, their balances and the minimum monthly repayment for each account.
  3. Find a little extra. Now that you know what you’re dealing with, you need to find some extra money. Adding any amount, however small, to your minimum repayments will decrease your credit balance much quicker, saving you money on interest and fees. So no amount is too small! Use your bank statements and receipts to analyse where and how you spend your money each month. Almost everyone can find one or 2 areas where they can spend less, or even cut out completely. Even if it’s small, decide on a specific amount and then stick to it every month. Now you’re ready to start creating a debt snowball!
  4. The snowball method is a strategy for repaying all your debt, starting with the smallest amounts first. This way, you’ll feel motivated each time you repay another account.

        Here’s how it works:

  • You keep paying the minimum repayments on all your accounts (don’t forget these!).
  • For the account with the smallest balance, you'll pay the extra money you found in step 3, seen above
  • Remember, a lot of your minimum repayment goes towards interest and fees. Because you’re now adding extra money, ALL of this money will be used to reduce your debt. This means you’ll pay less interest next month.
  • Keep doing this every month until the account is paid off, then close the account (so you stop paying fees).  
  • Now, add all of the money you were paying towards that account (the minimum repayment and the extra amount) to the monthly repayment for your next smallest debt. Here’s where things start to get exciting. Like a snowball rolling downhill and gathering speed as it grows, you’ll see your progress get faster as you close accounts and add the repayments to the next account.
  • Keep repeating this process until all of your accounts are repaid!

Once you pay off your last account, you will have a lot of extra money in your budget each month. Think carefully before you increase your spending! This is the money you can put away each month to help you build wealth and achieve your dreams.

Was this article helpful?



You may also like...