Debt Repayment
Introduction
This handbook is designed to help you take control of debt by showing you how to negotiate a lower interest rate and exploring two proven strategies for paying it off.
We know debt can feel heavy, even uncomfortable to talk about. But at Lucent, we believe the conversations that start uncomfortable are the ones that end with freedom. Before diving into payoff strategies, it’s important to pause and reflect. Ask yourself: How did I get here? Maybe it was living above your means with a credit card, taking out a car loan, or borrowing from someone. Understanding the “why” is the first step toward building a better “how.”
The second step is accepting a simple truth: in the short term, you may need to live below your means so that in the long term, your money works freely for you. By tackling debt aggressively now, you open up space for the future you want, whether that’s travel, a home, or the lifestyle you’ve always imagined.
How To Lower Your Interest Rate
Before we walk you through the two debt payoff methods, we recommend making one simple move: call your creditor and ask if they can lower your interest rate. There’s no guarantee this will work, but it’s always worth the effort. A quick call could save you hundreds, even thousands, over time.
Here’s a simple script from Ramit Sethi you can follow:
Step 1: Start politely
“Hi, I noticed that my interest rate is currently X%. I’ve been a customer for [X years], and I’d like to see if you can lower it.”
Step 2: If they push back
“I’ve done some research and I’ve seen lower rates available from other credit cards. I’d prefer to stay with your bank since I like your service, but I’d like to know what you can do to match or beat those rates.”
Step 3: If they still say no
“Can you connect me with a supervisor or someone who has the authority to approve rate reductions?”
Step 4: If all else fails
“Ok, if lowering the rate isn’t possible right now, can you tell me what I can do to qualify for a lower rate in the future?”
Debt Snowball Method
Focus: Motivation and Momentum
How it Works:
List your debts from smallest balance → largest balance.
Pay the minimum on all debts.
Put all extra money toward the smallest debt.
Once it’s gone, roll that payment into the next-smallest.
Continue until all debts are cleared.
Why It Works:
Quick psychological wins.
Builds momentum early.
Best if you need visible progress to stay consistent.
Example:
$600 credit card → $2,000 loan → $4,000 credit card
Pay off $600 balance first, then move upward.
Pros:
Early wins build confidence.
Simple to follow.
Keeps motivation high.
Cons:
Pays more interest overall.
May take longer compared to Avalanche.
Debt Avalanche Method
Focus: Interest Savings & Efficiency
How it Works:
List your debts from highest interest rate → lowest interest rate.
Pay the minimum on all debts.
Put all extra money toward the highest-interest debt.
Once it’s gone, move to the next-highest.
Why It Works:
Saves the most money on interest.
Gets you debt-free faster overall.
Best if you’re disciplined and motivated by efficiency.
Example:
$4,000 @ 22% → $600 @ 19% → $2,000 @ 7%
Pay off $4,000 card first, then $600, then $2,000.
Pros:
Saves the most on interest.
Fastest path overall.
Cost-efficient.
Cons:
Slow to see progress if high-interest debt is large.
Requires more patience.
Example
You have three debts:
Credit Card A – $4,000 at 19.9% APR (minimum payment: $120)
Student Loan – $6,000 at 5% APR (minimum payment: $60)
Credit Card B – $1,200 at 22% APR (minimum payment: $50)
You can put $500/month toward debt.
Debt Avalanche (highest interest first)
Pay minimums on all debts.
Direct extra money to Credit Card B (22%).
$500 - ($120 + $60 + $50) = $270 extra → goes to Card B.
$120 = Credit Card A
$60 = Student Loan
$50 = Credit Card B
Card B is gone in about 3 months.
Next, target Credit Card A (19.9%).
$500 - ($120 + $60) = $320 extra → goes to Card A.
$120 = Credit Card A
$60 = Student Loan
Card A is gone in ~10 months.
Finally, pay off Student Loan (5%) with freed-up payments.
Outcome: You save the most in interest. Total time ~21 months.
Debt Snowball (smallest balance first)
Pay minimums on all debts.
Direct extra money to Credit Card B ($1,200) — smallest balance.
Gone in 3 months.
Next, roll freed-up payment to Credit Card A ($4,000).
Extra grows to $320/month.
Card A gone in ~11 months.
Lastly, attack the Student Loan ($6,000).
Outcome: You get quick wins early and build momentum. Total time ~22 months, slightly more interest paid than Avalanche.
Final Thoughts
Both strategies work if you stay consistent. The best strategy is the one you’ll stick with whether that’s the quick motivation of Snowball, the cost efficiency of Avalanche
