Debt Stress? Make This List

Many things in life are less intimidating the more you know about them—and way scarier when you're in the dark. Take your debt, for instance: Debt can feel downright overwhelming when you don't know how much you owe or how long it'll take to pay it off.

If you're in the dark about your debt, simply making a list of key details about your debt could shed enough light on the situation to ease some of your debt anxiety. Getting a clear picture of what you owe can help you to formulate a plan and ensure it's realistic. A solid debt repayment plan could get you on the path to becoming totally debt-free.

And it all starts with a list. Here's what should be on your list so you can start taking control of your debt—and debt stress.

1. Total Amounts Owed 

The first step to taking control over your debt—and feeling less stressed—is to figure out how much you actually owe. List the balance for each account, then add them up for your overall total.

You can look at your loan or credit card statements to see what your current balance is. Lenders usually send statements to you every month, either digitally or via regular mail. If you gather all of your statements together and write down the outstanding balance on each account, you'll find out the total combined amount that you owe.

If you aren't sure if you're getting all your statements, you can also look at your credit reports to see what debts you have and how much you owe on each account. You have three (one each from Experian, Equifax, and TransUnion) credit reports, and can get a free copy of each one once a week from AnnualCreditReport.com. 

2. Interest Rates 

As you jot down balances, be sure to note your interest rates. Interest is the cost you pay to borrow. The higher your interest rate, the more your debt typically costs each month. Typically, the more you're paying in interest, the less of your payment that goes to paying down your principal.

Each of your loans probably has a different interest rate. In general, the interest rates on credit cards tend to be higher than the interest rates on personal loans. On the other hand, mortgage and car loan rates tend to be on the lower end of the scale, because they are secured loans and less risky for the lender—they can repossess your car or foreclose on your home if you don’t make loan payments.

Make a list of how much the interest rate is on each of your debts. This could help you decide which accounts to focus on paying off first.

3. How Much Extra You Can Pay Each Month 

After you have an idea of what you owe, the next step to reducing your debt stress is to figure out how to tackle repayment. While you need to make minimum payments on all of your debts to avoid damage to your credit score, you should try to pay more than the minimum if you can.

When you make an extra payment on a debt each month, that money typically goes directly to paying down the principal rather than just to covering interest. Because of this, you will generally pay off your debt balance much faster if you pay extra.

Reducing the principal also usually reduces the interest you pay. Most loans charge interest based on a percentage of the amount you owe. As you pay down the principal, the amount of interest you're charged should also go down.

Take a close look at your income and spending to see how much money you can free up. If you can reduce spending on non-essentials or work some overtime or a side gig to earn more income, you could make larger payments and become debt-free faster.

4. Months Until You're Debt-Free 

Once you know how much you owe and how much you can pay each month, you can figure out how many months it will take you until you can repay all of your outstanding balances.

There are many calculators you can use online to determine the exact number of months you have left until your debt balance hits $0. You just need to input some basic information on the debts you have and the amount you can pay toward them.

When you do this calculation, you may see that your debt can be paid back in a reasonable time—especially if you're making extra payments. If you discover that this is not the case, then you may want to start looking into options for debt relief.

For example, consolidating your debt at a lower rate could help make monthly payments more affordable and shorten that payoff timeline. Knowing there is an end in sight could help you commit to living on a tighter budget and make it easier to stay motivated when paying off debt. 

On the other hand, if you have a large amount of debt (say, $7,500 or more) and it feels like you'll never pay it off, you might consider a debt settlement program. Settlement could allow you to pay back less than the full amount you owe and get the rest of your debt forgiven. It could take two to four years to complete a debt settlement program, which could be faster than making minimum payments on your debts.

5. Total Amount You'll Pay to Become Debt-Free

Finally, you can look at the total cost it will take you to become debt-free. This can either help you decide that settlement is worthwhile or could put your mind at ease when you see that paying off what you owe is actually going to be affordable for you.

By taking these steps, you could reduce the stress you are feeling about your debt. Making a list and payoff plan could give you a clearer picture of your obligations and what it will take to break free from your creditors. Then, you can follow your plan to pay off your debt or settle it so you can move forward with a brighter financial future.