Paying down debt is an important part of money management. It frees more resources that can be made available for savings or unexpected expenses, and it improves your credit score. However, sometimes it can seem rather daunting to work one's way out of debt, especially if there are more than three or four loans involved. In such a position, it helps to aggressively pay down debt by using an extra payment on one of your loans each month. It involves discipline and planning, but it is the fastest way to dig oneself out of a money hole.



Now, there are two rules to follow when you apply this technique of money management. The first is to pay all your minimum balances without fail and second is to curtail spending, especially by credit cards. If you follow these two tips you can be sure everything else will fall in place as you work your way out of debt.

For planning the debt repayment schedule you need to put all your loans in a particular order and make a priority list for repayment, and pay off the debts as they appear on your list. There are two kinds of lists that you can make: the first list will order your loans from lowest to highest balance. In this list the loan with the lowest balance will be first on the list and hence the first loan to be paid off. The second type of list will be where you will put the loans in order of the interest rate that you are paying on each one of them, here though the balance is not taken into consideration. From the two types of lists you must pick one and then stick to it.

After deciding on the repayment priority with the help of the list you choose to follow, determine how much extra money, on top of all your minimum balances, can you divert towards loan payments each month. You take this extra amount of money and put it toward the first loan on your list. This means that if your minimum requirement for repayment on that loan is $50, and you have determined that you can pay an extra $25 each month, you will pay a total of $75 toward the first loan on your list. And for the remaining loans keep paying the minimum balance that you are required to pay each month.

When you pay off the first loan, move on to the second loan on the list. But this time put all of the money you put toward the paid off loan toward the second loan. So if you have a $10 minimum on the second, you add the whole $35 from the first loan for $45. You can see how as you pay off loans it goes faster and faster. But you never increase the amount of money you pay each month. Unless, of course, you can afford to up the extra amount you pay.