not featured
4 MIN

How To Manage Your Debt: Strategies & Tools

4 MIN Read
Even if you're financially responsible, life's unpredictable nature can sometimes catch you off guard, at times making it dangerously easy to fall into debt. Discover how to start managing your debt with these tips and tools.

Types of Debt

While being in debt is never ideal, some types of debt are better than others because of the effect the debt can have on you or your net worth. To reflect this, debt is sometimes broken up into “good debt” and “bad debt.”

Good Debt” is debt that is an investment back into yourself or that increases the value of what you own. That could include things like student debt or things that can grow in value over time such as a mortgage or investments.

"Bad Debt” is when you borrow for something that you are losing money on. This could include things like credit card purchases for clothes or food and payday loans. Because of how quick cars lose value, auto loans often walk the line between “good” and “bad” debt.


The main difference between good and bad debt is whether the investment will appreciate and grow in value or depreciate and lose value.


That being said, even if your debt is technically “good,” that doesn’t mean it won’t still end up hurting you if you become unable to make your payments.

Banzai Coach Session • 5 minutes
Get Out of Debt
Make a customized plan to be completely debt-free.
 

Debt Strategies

There are strategies to help you get back in control if you’ve found yourself falling behind or growing impatient with your debt payments.

  • Debt Snowball Method: With this method, you start small and work your way up. Begin by paying off your smallest debt first. Then, take the amount you were paying for that debt and pay it toward the next smallest debt, and so on until everything is paid off.
  • Debt Avalanche Method: Just like an avalanche, you knock out the big things first and then work your way down. Focus on paying off your highest interest rate first, then roll those funds into the next highest, and then the next.
  • Debt Management Plan: This is a plan set up by a non-profit or credit counseling agency to help you pay off your debts. Your counselor negotiates and handles everything with your lenders, often helping you get a lower interest rate or waiving fees. Once it’s set up, you only need to make a single payment to the agency, they handle the rest.
  • Debt Consolidation: Debt consolidation allows you to combine all of your debts into one payment by taking out a new loan, ideally with a lower interest rate, and using it to pay off your debts. Be careful though, sometimes you could end up being in debt longer because of the new loan and thus paying more interest overall.

The Get Out of Debt Coach above can help you make a customized plan to pay off your debt and learn more about what some of these strategies could look like for you.


Loading Coach...



Tips to Get Out of Debt

Beyond the major strategies, there are other adjustments that you can make to your approach to debt and daily spending habits that can make a large impact.

  • Reduce Expenses: The simplest thing you can do, if you act quickly, is stop spending on anything that isn't essential. Since debt doesn't go away by itself, the faster you stop adding to the problem the better. You might also consider how to reduce your expenses in the short-term, for example, by subletting your apartment or renting out a room in your home until you can get your debt under control.
  • Pay More Than Your Minimum Balance: Adding even just a little bit of extra money to your monthly payment can help you pay off your debt sooner and pay less overall. Just how much of a difference can it make for you? Use the Debt Payoff Calculator below to find out.

Debt Payoff Calculator

Explore what it would take to pay off your personal loan early.
Monthly Payment
$146
Interest Savings
$609
Interest to be Paid
$977
Payoff Date
Nov 2031
Loan Payoff Table
MonthsBaselineEarly
0$10,000$10,000
1$9,129$8,521
2$8,232$6,997
3$7,307$5,426
4$6,355$3,808
5$5,373$2,141
6$4,362$423
7$3,320$0
8$2,246$0
9$1,140$0
10$0$0
Loading Coach...
Loading Coach...
Disclaimer
While we hope you find this content useful, it is only intended to serve as a starting point. Your next step is to speak with a qualified, licensed professional who can provide advice tailored to your individual circumstances. Nothing in this article, nor in any associated resources, should be construed as financial or legal advice. Furthermore, while we have made good faith efforts to ensure that the information presented was correct as of the date the content was prepared, we are unable to guarantee that it remains accurate today.

Neither Banzai nor its sponsoring partners make any warranties or representations as to the accuracy, applicability, completeness, or suitability for any particular purpose of the information contained herein. Banzai and its sponsoring partners expressly disclaim any liability arising from the use or misuse of these materials and, by visiting this site, you agree to release Banzai and its sponsoring partners from any such liability. Do not rely upon the information provided in this content when making decisions regarding financial or legal matters without first consulting with a qualified, licensed professional.