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How to pay down debt

Don’t let debt ruin your retirement savings. While planning for retirement, it is essential to pay down debt. Start with paying off your smallest debt first, so that you can start saving more retirement money. Next pay off the debt with the highest compound interest, until you’re back on track.

  • Payment calculator
  • Why faster is better
  • Make a plan
  • Could you pay less?
  • Rules and strategies

How Long Till You Pay Off a Debt

Annual Interest Rate
Current Payment
New Payment
See Result
If you switch to the new payment:


Months to Pay Off with Current Payment


Months to Pay Off with New Payment


Payment-Free Months


Interest You'll Pay

Less Interest

The less interest you will need to pay.

Debt Free

The quicker you will be debt free.

More Money

The more money you will have to spend or save as you see fit.

Make a plan:

  1. Check the rates you’re paying. A better deal could be out there.
  2. Make a budget and determine how much MORE you’ll use each month to pay down your debts.
  3. Determine which debt you’ll pay down first and which you’ll pay down next.
  4. Then pay down your debts! Keep your statements and track your progress to stay motivated and get where you want to go.

Could you pay less?

Check the interest rates you pay–on your mortgage, auto, student loans and credit cards.

Compare the interest rate you pay with the rates advertised online, in newspapers, and in magazines. Ask friends and family what they pay.

If you think you are paying too much, get your credit score–your credit score matters. Then find out the interest rates charged for people with scores in your range.

If you can improve your credit score, do that right away!

If you are paying an interest rate that is too high, call your lender and see if you can get a lower rate. Ask to speak with a supervisor if you can’t get anywhere with the first person you speak with.

If you can’t negotiate a lower rate, consider switching lenders.

If you have a hardship, ask your lender or a legitimate credit counselor about:

  • Forbearance. A plan that freezes your account and sets up automatic monthly payments.
  • Debt management. Where you work with a credit counselor.
  • Watch out for debt-collection scams that prey on people in financial trouble.
  • If you are paying high rates on auto, student, or credit card loans, consider consolidating your debt in a lower-interest home equity loan or by refinancing your mortgage. Your new interest rate should be lower and tax-deductible. But know if you can’t make the payments, you could ruin your credit AND lose your house.
Are you paying too much? What Americans paid in interest (2016):
Type of Loan Average Yearly Interest Rate
Mortgage 4.5%
New Car 4.25%
Credit Card 14.5%

General rules and strategies

General rules
  • Pay off debts handled by a collection agency – your credit is at risk.
  • Don’t fall behind on any debts – pay at least the “minimum due” to ward off collection agencies.
  • Try not to add more debt – even more low-interest debt.
Two basic strategies

Pick the one that makes most sense to you:

  • Pay off your smallest debt, then the next smallest, then the next. You’ll soon have fewer bills and creditors, so you can see the “light at the end of the tunnel.”
  • Pay off the debt with the highest interest rate, then the next highest, then the next–and don’t reduce the amount you use to pay down debts until you’re “out from under.” It’s the quickest and cheapest way to pay off what you owe.

DISCLAIMER: The information provided on the Icon website is for educational purposes only. It is NOT intended to provide personal financial advice.

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