There are three categories of people who want to repay debt. As you might imagine, their motives for repaying will differ greatly. These motives ultimately need to align with the debt repayment plan chosen in order for people to be successful with this huge financial goal.
Here is what we know about programs or plans that people use to repay debt.
1. The average person carries roughly $20,000 in debt. This amount is insignificant for some and a source of health-altering stress for others (income plays a role in some 
cases, but in most cases it is not income that differentiates whether an individual feels that this amount of debt is considered “too much” or “not much” and everything in between).
2. Most people fail at sticking to a debt repayment program. We know that failure, for the most part, results from a perceived lack of progress.
3. While consumer debt is considered a bad thing to have, most people carry it anyway. Even people with the resources to pay such credit back without blinking an eye will carry consumer debt. Yes, it is not smart financial planning, but if people are going to carry it, then it makes sense to borrow wisely (e.g. at lower rates), in such a way as to advance one’s personal financial goals.
With these three pieces of knowledge before us, we came up with three reasons why someone would want to repay debt.
- Stress levels. Without question, money and finances constitute one of the biggest concerns that people have in their daily lives. When the stress levels get to be too much, an individual is quite likely to reach a tipping point and make debt repayment a personal goal.
- Cash flow. One reason why many people will sit down and decide to repay debt is because they want to improve their cash flow. Telling a child that she can’t play ball this summer because there isn’t enough money in the budget is heartbreaking, let alone having to figure out how you will pay for your next tank of gas.
- Costs. This is the fundamental reason why people should never carry debt in the first place: it costs money. This money can be better used to fund a retirement savings program, a child’s education, a new purchase, etc.. In fact, with the average person carrying $20,000 in debt, if you amortized those interest costs over 10 years you would have $482,343.40 paid to someone else! Ouch.
Of course, almost all of us can benefit from eliminating debt. We can cite any of the reasons above, but we all have on reason that stands out. Here are some questions for each of those reasons:
Stress Levels
- Does my debt keep me awake at night?
- Do I worry that my credit rating is going to get hammered soon?
- Do I feel physical pressure on my shoulders or chest?
Cash Flow
- Does my debt keep me from doing the things I want to do for myself or my loved ones?
- Do I have to scramble to make my minimum payments from month to month, often borrowing from another credit facility to pay another?
- Is my current debt level holding me back from getting additional credit (e.g. I can’t qualify for the mortgage I need because I have too much debt?)
Costs
- Am I frustrated by the amount of money I give to credit card companies?
- Do I complain about the rates I am being charged on my borrowing?
- Does I bother me that I am charged one rate but my term deposits are not earning the same rate?
Hopefully, you will have a better idea of the type of debtor you are and why you want to repay your debt. Once you know, you can better tackle your debt issues going forward. Here are the strategies associated with each of the above. You can click on the links (the underlined text) to go to the corresponding strategy.
- I Want to Repay Debt Because It Stresses Me Out – Debt Snowball Method.
- I Want to Repay Debt Because It is Keeping Me From Achieving My Personal Goals – Debt Service Method.
- I Want to Repay Debt Because I Hate The Idea of Someone Else Getting Ahead So Easily – Straight Debt Repayment Method.