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Behind on student loan payments? Caught up in credit card debt? Being hounded about personal loans? It can be difficult to decide where to start and how to make the biggest dent in your financial obligations, but you probably know you should. Not everyone is in the same financial situation, not everyone even has the same type of debt, so not everyone should pay it back in the same way. Check out the options below to see which debt payoff method is best for you.

First Step

When you are ready to really start chipping away at your debts, it’s a good idea to compile a list of everyone you owe and calculate exactly how much you owe them. Once the balances are recorded, include the interest rates and required minimum payments. The numbers may be overwhelming, but they can help you determine where exactly you stand. You can use this credit card payoff calculator to help you estimate how long it will take you to pay off your balances.

Consolidation

Consolidating your debts means lumping all your balances into one amount and getting a new loan to pay them off. You then focus on paying off the new loan as quickly as you can. You can use a personal loan or balance transfer (here are some cards judged to be among the best for balance transfers) to hopefully reduce the interest rate you are paying, but it will not make your problem disappear.

Avalanche

This method involves ordering your debt by interest rate and paying down the account with the highest interest rate first, then the second-highest rate, etc. This will likely save you the most money in the long run as you will be keeping only your lower-interest rate debt for longer. It’s important to still meet the minimum payments for all your other debt while focusing on the highest interest rate accounts.

Snowball

Snowballing your debt means you focus on the size of your balances, ranking them from smallest to highest and paying them off in that order. Paying your debts in order this way and having small successes can help keep you motivated to continue paying off debt.

Settlement

If it doesn’t seem like you will be able to pay back your balances in the near future or debt collectors have been hounding you over significant debt, you may want to try negotiating a settlement. This means you work with your creditor to pay less than the full balance to eliminate the debt. This can be a good option if you can come up with a significant chunk (more than 30%) of your debt within a relatively short amount of time. It’s a good idea to talk with an expert before going this route.

In the end, the important thing is you are working to pay off debt. You can choose one of the above options or create your own combination. What works for one person may not work for another. The important thing is committing yourself to making progress toward financial freedom. Paying down your debt can lower your credit utilization — a major factor in your credit scores. You can see how your utilization is impacting your credit scores for free on Credit.com.

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