3 Strategies to Pay Down Debt

Person holding a blue credit card in their right hand in front of a laptop, with a smartphone, notebook, and pen on a white desk.

Most physicians and dentists have some debt. So, it’s no wonder that so many people are passionate about freeing themselves from the constraints of monthly payments and interest rates. You want to feel in control of your finances, especially with how expensive the medical field is.

However, there are also plenty of scams and fraudulent entities trying to exploit that passion and make an extra buck. Once someone signs the contract with these people, they find themself with little to no debt relief, ludicrously high interest rates, and debt collectors banging on their door.

That’s why it’s important to pay off your debt the right way. It may take longer, but nothing compares to seeing $0 on your next credit card statement or student loan bill. So, if you’re ready to make a dent in your debt, here are three strategies to help you choose the best option.

1. Debt Snowball

One method is the Debt Snowball, popularized by financial guru Dave Ramsey. The idea behind this method is to pay off your lowest balance first and build momentum, just like a snowball.

Pro: The main benefit of this method is that you rapidly reduce your payments and interest from your monthly expenses.

Con: The biggest drawback is that you’ll likely pay off a debt with a lower interest rate and leave a higher one still standing.

We believe this method is especially helpful to borrowers with multiple small debts. By knocking out small debts sooner, you improve your credit score, eliminate monthly payments, and free yourself from interest. It’s a great method to add to your arsenal.

2. Interest Minimization

This approach addresses the interest rate problem. Here’s how it works: You prioritize the debts with the highest interest rates first, regardless of their amount.

Pro: You’ll quickly reduce your costs from interest payments, which frees you from the uncertainty of interest rates.

Con: More of your debts will stick around longer if one high-interest rate debt takes a while to pay off. If you have many small loans and one large loan, it will take a long time to get rid of the smaller ones.

We find this approach to help borrowers who have at least one debt with a notably high-interest rate. The costs of monthly interest rates quickly add up, so if you have one debt with a very high rate, knocking that one out first will quickly pay itself back.

3. Consolidate and Attack

This method is about combining your multiple debts into one, such as putting car payments under a lower-interest credit card. For example, if you have a car payment with a higher interest rate than your credit card, paying off your car with your credit card will save you hundreds per year.

Pro: This approach lowers your overall interest and reduces your monthly minimum payments. Less interest equals more money in your pocket every month, which you can save, spend on debt, or invest.

Con: By creating one larger debt, it’ll likely take more time to pay off and keep you in debt longer. This may equal much more in cost over the long term, which is a bad choice for many borrowers.

This strategy is effective for borrowers who find having multiple debts, all with different interest rates, confusing and overwhelming. They find relief in simplifying their portfolio by grouping all of their debts under the umbrella of one. When in doubt, keep things simple.

If you’re interested in learning more about our services, or how we can help you with your finances as a new or training medical professional, contact us here.

Sources Cited

Recent Blogs
3 blue chevrons

Are you a resident physician facing the financial challenges of transitioning from medical school to residency? Our physicians understand the anxieties and uncertainties of this pivotal time in your career.

3 blue chevrons

You’ll often hear a lot about credit scores and how important they are to your financial future. But do you know what a credit score is, exactly, and what goes

3 blue chevrons

As you get ready to begin your residency, you’ve got a lot to prepare. Don’t worry; we’ve got a list of things to keep in mind as you prepare to

3 blue chevrons

In your first year of residency, you’ll be very busy. You know that you’ll be working long hours. But what else can you expect? We have some lessons from doctors

3 blue chevrons

Congratulations! You’ve gone through years of grueling training, sleepless nights, and innumerable tests to finally become a doctor. As you begin this new chapter in your life, one issue that

3 blue chevrons

Doctors, caring for patients is your first responsibility. But to achieve that properly, you must manage your time and resources well. This kind of planning is crucial in 2024. So,

Please select listing to show.