<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=489206321732816&amp;ev=PageView&amp;noscript=1">
Back to Tropical Financial Blog

Work off your personal debt ‘fat’ in 2023


This new year, you may have a hangover – from the debts you racked up during last year, especially during the holidays when it was easy to binge on plastic for presents and celebrations. You can get quick relief by taking a strategic approach to zeroing out debts one of several ways, including a debt-consolidation loan.

The first step is probably the easiest: Check balances on outstanding debts – bank, local store, gas, digital accounts, etc. If you pay your bills online, you can quickly find all that information.

Write down on paper or enter into a spreadsheet the numbers with the creditor name in lefthand column, the balanced owed in the second, and the interest rates in third. Omit your car and home loans, and any others with fixed repayment periods.

With the numbers in hand, consider these three approaches on “slimming” your debts:

Route 1: Pay off the smallest balances first. You will whittle the list faster, leaving you in a month or two with just the biggest debts to manage over a longer time period. When a card balance is paid off, put the plastic away. Otherwise, you will wind up back where you started.

Route 2: Pay off debts based on highest interest rate. Let’s say you have a $5,000 balance on a credit card. At a 14% rate, your interest expense in a typical 30-day cycle would be $57.86. On a card with a 29% rate, you will owe $120.56 in interest. The more you dent or erase that higher-rate balance, the more money you will have to pay off other debts.

Route 3: Use our debt-consolidation calculator to calculate what it would take to pay off your card debts with debt-consolidation loan. You will need your credit score for that, which you can get free in an annual credit bureau report.

Why a debt-consolidation loan? First, you will trim that long list of debts to one. Now, you will have a single payment, not the four or more based on the number of credit cards the average American has. Second, you will have a single financial goal: Make that payment every month.

join tropicalfcu cta

Third, and most important, you may be eligible for a lower interest rate on the loan than any of your other debts. Much depends on your credit rating. The stronger your credit, the more likely you will receive favorable treatment from a lender.

Once you have chosen a payoff plan, you must commit to keeping the debt “fat” off. Here’s how:

  • Limit your purchases to essentials. That includes online shopping and monthly online subscriptions. Going “lean” will pay dividends as you free up money to apply toward debt balances.
  • Keep in your wallet only one or two cards – the ones with the lowest interest rates. They are your cheapest plastic.
  • Be extra cautious about tapping into your savings. You don’t know when you might need the money for an emergency such as an illness or injury, or a car repair.
  • Consider taking on a project or temporary job. The extra income applied directly to your debt balances put you in better financial shape sooner.

click to start downsizing your debt with TFCU Get Beyond Money, a free resource from Tropical Financial Credit Union, can help you with this and other challenges. On the free website, you can read articles, listen to podcasts and find other resources for better financial future.