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Paying Down Debt

No matter what you owe, there are solutions to get you where you want to be—back on track.

Let’s face it, dealing with debt is challenging. Whether you’re paying down a loan or credit cards, it can be stressful. We want you to know that there is hope!

Your Situation

No matter what the situation might be, when it comes to paying down debt, there are options available. Additionally, it’s important to know that there’s no “one size fits all” solution.

To determine the best way to defeat your debt, begin by following these steps:

  1. Evaluate your monthly income and expenses to determine what you can afford to pay. Download the Make a Budget worksheet from to get started.
  2. Determine your debt profile: The type of debt you owe and the amount of each type.

    To compile an accurate debt profile, it’s helpful to obtain a copy of your credit report, if you haven’t done so already, through the Annual Credit Reporting Service. Each year, you are entitled to one report from each of the three major credit reporting bureaus—Equifax, Experian, and TransUnion. To order copies, visit or call 877.322.8228.
  3. Select a repayment strategy: Decide which repayment strategy you think will work best for you. Several possible strategies are outlined below.

    If you can manage to find a surplus in your budget, pursuing a self-help option, such as a fast-tracked repayment plan, might be the best way to pay down your debt. Utilize a debt repayment calculator to figure out if the amount you can afford to pay will make a difference.

    Otherwise, exploring outside help is important to consider. Thankfully, there are trusted services available to help you. Review the following chart to learn which services may fit with the type of debt you owe:
Debt Services Breakdown
Type of Debt Products/Services Available
Unsecured – credit cards, collections, etc. Consolidation loans
Home equity loans
Credit counseling/Debt management
Secured – car loans, home loans, etc. Home equity loans
Student loans Consolidation loans
Home equity loans
Government-based repayment plans
Taxes & fines Consolidation loans
Home equity loans

Continue reading for more information on repayment strategies to consider.

Self Help

Finding a way to pay down your debt on your own has benefits. It’s typically the cost effective option and is beneficial in restoring your credit history. On the flip side, self-help solutions require specific circumstances—positive monthly cash flow, ability to make significant payments, good credit, etc.—that aren’t normally in the cards for those in financial distress. Following are some trusted self-help opportunities for anyone attempting to eliminate debt:

Evaluate your options

Work with your creditors to evaluate options and solutions. Share the challenges you face and express your desire to identify a plan to get back on track.

Credit card balance transfers

Obviously the point of a balance transfer is to move your debt to a lower interest card. Unfortunately, there are some issues to watch out for. Number one is that there’s almost always a transfer fee and a limited period for the lower interest. Secondly, there will be a credit check done which can lower your credit score.

Consider using savings

You worked hard to build your savings. Using it to pay off your debt is a tough choice to make. Your savings is your safety net. It’s there to get you through tough times—unemployment, home and car repairs, medical bills, and more. Therefore, using savings to cover debts only makes sense if the circumstances are right.

Fast-tracked plans

A fast-tracked repayment plan means that you’re applying payments to your debts in a way that pays them off the fastest. If you can manage a $200 surplus from your budget, one creditor receives the majority of the $200 payment and the others receive just the minimum. Of course, the benefit depends highly upon the amount you are able to pay and the exact makeup of your debt portfolio.

Hardship plans

A hardship repayment plan is a special program offered by many credit card companies to provide alternatives for customers who are having difficulty making payments. Generally speaking, to qualify for a hardship program you have to have suffered a significant financial setback such as a job loss, unexpected long-term illness, large reduction in pay, or death of a spouse.

To learn more about fast-tracked and hardship plans, visit

Outside Help

Digging out of debt can be a complicated process. It can often take more than one person to do it right. At ESL we’re here to help.

Consolidation loans

A debt consolidation loan is often a way to pay less interest on debts such as credit cards. You use the money from the loan to pay off your credit card balances, close the accounts, and then simply pay the one consolidated loan. This can save a lot in the long run.

An ESL Home Equity Line of Credit or ESL Personal Loan have flexible terms to help you meet your needs.

Debt management plans

A Debt Management Plan (also known as a DMP) is what most people mean when they say credit counseling or consolidation. In reality, a DMP is a way to pay down your debt as you make monthly payments to a non-profit credit counseling agency. They redistribute those payments to your creditors according to an agreed upon plan.

ESL partners with CCCS of Rochester which offers Debt Management Plans to Rochester area customers.

Watch out for debt settlement programs

A debt settlement program looks like a DMP on the outside, but operates much differently and carries potentially harmful consequences. A consumer pays into a debt settlement plan in a similar fashion as a DMP through monthly contributions; however, money is not redistributed to creditors every month. Instead, the payments are placed into an account each month to build a “fund” that will later be used to negotiate settlements on unpaid balances.

Ways to Repay

In any given situation there can be a myriad of solutions available depending upon the circumstances and challenges presented. Many of these choices carry significant consequences. Contact an ESL representative to discuss all your options.

Pay more than the minimum


  • Far less interest is paid
  • Debt is paid off much faster


  • Requires the ability to pay more
  • Need to rework monthly expenses and income

Debt reversal pyramid

With this strategy you list debts smallest to largest, concentrate monthly payments on highest interest first, and pay minimums on others.


  • Less interest is paid
  • Debt is paid off faster
  • Maximizes monthly payment impact


  • Have to pay on time and discontinue credit use
  • Have to balance multiple payment schedules and due dates
  • May not be effective if terms are the same for each account

Use your savings


  • Beneficial if interest on debt is higher than your savings rate
  • Eliminate balances quickly


  • Savings accounts are important safety nets for avoiding further financial challenges

Borrow against your life insurance

In essence, you are borrowing your own money. The repayment method is usually set by the policy holder.


  • The interest on a life insurance loan is often less than credit cards


  • Policy must have a cash value
  • What's borrowed has to be repaid with interest
  • Any outstanding balance plus interest reduces policy

Borrow against your home equity

Learn about home equity solutions from ESL.


  • Interest rates are less than credit card rates
  • Interest paid on a home equity loan may be tax deductible


  • Your home is collateral
  • You can lose your home if you can't repay

Borrow from your retirement—IRA or 401(k)


  • The interest on a 401(k) loan is often less than credit cards
  • With a 401(k) you can borrow up to 50% or $50,000 whichever is smaller
  • Interest paid on a 401(k) loan goes back into the account


  • 401(k)s are protected from creditors and bankruptcy
  • Balances unpaid after five years are taxed like distribution
  • A 10% penalty is charged for early withdrawal if you are younger than 59 1/2

Use credit counseling/debt management plan

With this strategy you make single payments to an agency who distributes funds according to an agreed upon plan. Find a non-profit credit counseling agency near you.


  • Reduced interest when repaying credit cards
  • One monthly payment instead of multiple payments
  • Can be more effective than negotiating on your own


  • For-profit agencies often charge significant fees
  • Only unsecured debts are typically included in a plan
  • You may be required to close all credit cards

Call your creditors to discuss your options


  • Credit card companies may have alternative solutions
  • Hardship plans are available in special circumstances


  • A good credit history will be required
  • Being close to your credit limits can create challenges


Bankruptcy exists for a reason. It’s a legal process that offers those who are financially distressed the opportunity for a fresh start. There are many reasons why someone might face financial challenges leading to bankruptcy—unexpected healthcare costs, loss of employment, divorce, etc. If you're thinking about filing, it's important to know the facts before moving forward.

The following is not intended to be legal advice, but helpful in understanding bankruptcy as a whole. Please contact an attorney if you have questions that are legal in nature.

Bankruptcy basics

  • Legally eliminates (discharges) eligible debts.
  • Not all debts can be always eliminated such as taxes, student loans, and child support.
  • There are two types of consumer bankruptcy—Chapter 7 and Chapter 13.
  • It’s important to seek help from a well-qualified attorney when filing bankruptcy.
  • Bankruptcy will be reported to your credit report and will negatively impact your credit score.
Bankruptcy types
Feature Chapter 7 Chapter 13
Cost Average = $1,000
Average is typically higher than Chapter 7
Length Average = 4–6 months Average = 36–60 months
Eligibility Below median income Ability to make payments
Repayment None Determined by the court
Property Must sell non-exempt property May keep property if payments are maintained
Credit reporting Reported for 10 years from the date of the filing Reported for seven years from the date of the filing

Looking for more information about repaying debt? Check out these additional resources: