I’m a Financial Planning Expert: These Are the 4 Best Approaches for Paying off 4 Types of Debt

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Paying off debt often means utilizing a repayment method to ensure the debt is paid in full. However, some of these tried and true approaches might look a little different in 2023. Millions of borrowers are preparing to begin making repayments on their student loans after a three-year pause this October, and interest rates — and balances — are soaring for those who count credit cards among their highest personal debt.

How do you get ahead of the minimum balance owed to ensure each piece of debt is paid off? GOBankingRates spoke to two financial professionals about which methods to use when paying off student loans, credit cards, mortgages and car loans. Here are the four best approaches to paying off these four debt types.

Student Loans

There are a few options, like refinancing and consolidation, one can explore when repaying student loans. If you aren’t eligible for these options, Jay Zigmont, CFP and founder of Childfree Wealth, said to do an analysis of whether you want to pay off your loan or take advantage of an income-driven repayment plan. 

Borrowers can explore whether they qualify for Public Service Loan Forgiveness (PSLF). According to FAFSA, qualifying candidates must work full-time for a government agency or a specific nonprofit organization, have Direct Loans, repay your loans on an income-driven repayment plan and make 120 qualifying payments.

Make Your Money Work for You

What if I don’t qualify? Check out the SAVE/REPAYE program. “This will both lower your payment and stop interest from accruing,” said Zigmont. “Under PSLF, your loans can be forgiven after 10 years, and under SAVE, it is 20 years or less for undergrad.”

Credit Cards

Since credit cards often carry the highest interest rates of all debt, Rob Burnette, CEO and fiduciary financial advisor at Outlook Financial Center, recommends paying these off first.

If you have balances spread out across multiple credit cards, Burnette said start by paying off cards with small balances first. Then, begin paying off the credit cards with the highest interest rates, one card at a time. As you focus on paying off cards with high interest rates, you can continue making the minimum payments on other card balances.

“Once a credit card balance is paid off, add the payment amount to the minimum payment on the next card,” said Burnette. “Repeat the process until all cards are paid off and resist the temptation to keep carrying monthly balances in the future.”

Car Loans

Those who have a 0% interest car loan won’t need to rush to pay it off quite like someone with a high interest rate car loan.

The first approach is determining whether you really need a car. Zigmont said your household may decide to downsize from two cars to one, especially if one or more heads of the household work from home.

If you absolutely need your car, Zigmont recommends adding $50 to each payment, which is put towards the principal. Then, challenge yourself to increase this amount of money each month.

Make Your Money Work for You


Mortgages are one of the few pieces of debt where you don’t need to rush yourself to pay it off. The only exception, Zigmont said, is if the interest increases on your mortgage.

Those who do want to get their mortgage paid off sooner than later may check to see if their mortgage servicer offers a biweekly payment. “Making biweekly payments will result in lower interest paid, and you will make an extra payment each year,” said Zigmont.

If the house you bought is not your final home, Burnette said there’s no advantage to paying off the mortgage early, either. The better approach, Burnette said, is to create a side fund to accumulate funds that can be used later to pay off the mortgage or be used for a down payment or cash paid for your final home in retirement.

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