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How to Create a Debt Payoff Plan

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When you’re in debt and want to get out of the cycle for good, one of the first steps you can take is creating a debt repayment plan. With that in mind, we’ve created a guide on how to create a debt payoff plan below. If you follow these steps, there’s a good chance that you will be able to pay off your debt faster than you would alone. Keep reading for more information on how to make it happen.

What is a debt repayment plan?

At base, a debt repayment plan is exactly what the name suggests. It is a financial plan that you create to streamline the process of paying down your debts. Typically, a plan like this is only for personal use and does not involve professional help. While it is possible to hire a professional to assist you with negotiating with creditors, that type of repayment plan is usually called a “debt management plan.”

Borrowers can use debt repayment plans for all sorts of debts, including credit card debt, student loan debt, and tax debt. However, it is usually only recommended to go this route if your monthly debts are less than 50% of your total take-home pay. If you have a bigger debt load than that, you may be better off trying for a debt settlement plan instead.

What are the pros and cons of using a personal debt repayment plan?

Like any financial plan, using a personal debt repayment plan is not the right answer for everyone. To that end, we’ve laid out a few advantages and disadvantages to this method below. Read them over to have a better idea of whether or not you should try to pay off your debt on your own.


  • It’s free: If you decide to hire a professional to help you tackle your debt, you will have to pay a fee for their services. On the other hand, if you can tackle your debts on your own, you’ll only need to pay what you owe your creditors.
  • You’ll pay down debt faster: Having a structured debt repayment plan often helps borrowers pay down their debts faster than if they just make payments as they see fit.
  • It won’t hurt your credit score: Debt management plans and debt settlement plans can have a negative impact on your credit score. With this method, as long as you continue to make your payments on time and pay at least the minimum amount, your score will not be affected.


  • It takes a lot of self-discipline: Creating and sticking to a debt repayment plan is hard work. You’ll need plenty of self-discipline to pay off your debts in full.
  • You’ll have to pay the full amount that you owe: Other debt management methods, specifically debt settlement, will allow you to pay a smaller portion of your debts, possibly interest-free. With this method, you’ll be expected to pay the total of all of your existing balances plus interest.
  • You won’t have professional guidance: Often, having a professional guide you through paying off your debts can make the process feel more manageable. Here, it’s up to you to navigate the process.

How to create a debt payoff plan

If you’ve looked at the pros and cons of creating a debt payoff plan and have decided that it is the right choice for you, keep reading. Below is a step-by-step guide to putting together a plan of your own. 

Choose a debt repayment method

While there are many debt repayment options out there, the debt snowball method and the debt avalanche method are the two most common. Take a look at each one to determine which is a better fit for your financial situation.

Debt avalanche method

With the debt avalanche method, you tackle the balance with the highest interest rate first. In this case, you would make the minimum payment on all of your other debts, then put all of your excess funds toward paying down your highest-interest debt. With this method, it may take you longer to see progress at first, but you’ll save money in the long run because you’ll owe less in interest charges.

Debt snowball method 

On the other hand, the debt snowball method involves paying off your smallest debts first. Here, you would pay the minimum payment on all your other debts and put all your excess income toward paying down your smallest balance. This method is meant to give you a series of small wins at the beginning of your debt-payoff journey to help you stay motivated. But, unfortunately, it will cost you more in interest charges over time.

Follow through on the plan

No matter which method you choose, you have to follow through with your plan. Follow the steps prescribed each and every month until you reach a point where you are debt-free. Once you reach that point, you should aim to pay off all your balances in full each month.

Work to change your spending habits

Lastly, as you work to pay off your debts, it is crucial that you also work on changing your spending habits. Creating a debt repayment plan only works if you change the behavior that led you to become in debt in the first place. Otherwise, you will continue to create new debts as you pay the old ones.

The bottom line of debt repayment plans

While people wonder how to create a debt payoff plan, in practice, fewer people follow through on the steps necessary to actually pay off their debts. If you’ve read through this article and you think the steps described may be too difficult for you to follow, there is another option. At Tayne Law Group, we can help you get a handle on your debt once and for all. We’re just a phone call away. Call us for more information at (866) 890-7337, or fill out our short contact form and we’ll get in touch!

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