When you think of a life that’s debt-free, what does it look like? Do you dream about having a credit score good enough to buy a nice car or a mortgage with the absolute best rates? Maybe you just want to be able to save for a vacation without wondering if you should be using that money to pay off debt.   

Whatever your financial goals are, if you have debt, it’s probably getting in the way of you reaching them. Debt is a drain on your income, because it means you’ve spent the money before you’ve earned it. It wreaks havoc on your budget, weighing you down with expenses that recurs until you’ve paid off the debt plus interest. And it throws off your credit score because it changes your debt ratio.

Your debt ratio is the difference between the amount you owe and the amount you’re allowed to borrow. The more debt you take on, the higher this ratio becomes. And since debt ratio is worth approximately 30 percent of your credit score, more debt usually means a lower credit score.   

Lenders and credit card companies use your credit score to determine how good of a borrower you are. The better your score, the more credit you qualify for and the lower the APR will likely be for you. Of course, if you do end up borrowing more, your debt ratio will go up and your interest rates might increase with any future loans you apply for.

The only way to break this cycle is to carefully consider whether you need to take on new debt, and to pay off the debt you do have. There are two popular ways of doing this. One is known as the debt snowball. Every month, you:

  1. Calculate the absolute maximum amount of  money you can budget for debt repayment. 
  2. Pay the minimum amount on every balance that you carry. 
  3. Subtract the total of your minimum payments from what you’ve budgeted for repayment. 
  4. Take whatever is left and put it toward your smallest total debt.

Once you pay off the smallest of your total debt, your next-smallest will be the one that you focus on repaying. The process continues until you’ve paid off everything.

Many people find the snowball method to be the most satisfying way of eliminating debt. Because you start with your smallest deb and the results are noticeable earlier. Others prefer the debt avalanche method. It starts off the same as the snowball method. You figure out how much money can go toward your debts and start by paying the minimum on every bill. The difference lies in what happens next.

Instead of paying off your smallest debts first, you focus on the debts with the highest interest rates. You may not see results as quickly, because you may not be starting with your smallest debt. The upside is that the more you reduce the balances on your high-interest debts, the less interest you will add to your bills going forward. This ultimately saves you more money than the snowball method.

Paying off debt takes time and discipline, but it does a lot for your overall financial picture. You just need to figure out:

  •    How much you owe
  •    What your interest rates are
  •    How much you can afford to use for repayments each month

After that, it’s about remaining disciplined and seeking out new financial education to continue expanding your bright financial future. Every dollar you use to pay off those debts is a dollar closer to financial health.



* ​Please note that all calls with the company may be recorded or monitored for quality assurance and training purposes. *Clients who make all their monthly program deposits pay approximately 70-75% of their original enrolled debts over 12 to 60 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete their program for various reasons, including their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period of time. We do not assume consumer debt, make monthly payments to creditors or provide tax, bankruptcy, accounting or legal advice or credit repair services. Our service is not available in all states and our fees may vary from state to state. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. Depending on your state, we may be available to recommend a local tax professional and/or bankruptcy attorney. Read and understand all program materials prior to enrollment, including potential adverse impact on credit rating. The use of debt settlement services will likely adversely affect your creditworthiness, may result in you being subject to collections or being sued by creditors or collectors and may increase the outstanding balances of your enrolled accounts due to the accrual of fees and interest. However, negotiated settlements we obtain on your behalf resolve the entire account, including all accrued fees and interest. ​If you have any questions or comments about our disclosures as outlined above, you can contact us at: legal@moneyladder.com