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When you find yourself in debt, it's easy to stick your head in the sand and avoid dealing with it. Trying to get out of debt is challenging and can be downright all-consuming. But, your debt won't go away on its own and there's no better time than right now to start paying it down. The longer you wait, the harder it gets. (How was that for a pep talk?)
There are products, services, and techniques that can help you get out of debt faster. They all take some time and effort, but think about how good it will feel to be debt-free.
6 strategies to pay off debt
In addition to making the minimum payment on all debts, try one of these repayment plan options to make a dent in the balance faster. While each strategy has its own benefits and drawbacks, you’ll need to develop money management skills to make any one of these strategies stick.
1. Balance transfer credit cards
Best for: High-interest credit card debt
Balance transfer credit cards are a common strategy for debt reduction, especially if you are dealing with high interest rates or overall credit card debt. A balance transfer credit card is one with a low or 0% introductory APR. You can transfer your credit card debt to a balance transfer card and benefit from not paying interest for a prescribed amount of time.
Let's look at a hypothetical example to see how it works. Let's say you have $10,000 in credit card debt and you currently pay around $300 per month toward that balance on a card that charges a 24.74% APR. You open a new balance transfer card that offers 18 months of 0% intro APR and charges a 3% balance transfer fee. After 18 months, the interest rate on this new card goes up to 24.74%.
Here's how long it will take you to pay off your debt and how much you'll pay in interest when you transfer your balance to the new card versus continuing to pay on the same card.
| Transferring balance | Making no change | |
| Time to pay off debt | 37 months | 54 months |
| Amount paid in interest | $1,352 | $6,885 |
As you can see, by using a balance transfer card, you'd pay off your debt 17 months faster and cut your interest payments by over $5,500.
Balance transfer cards can be a really valuable tool to get out of debt faster. Of course, you need to use them responsibly, make your payments on time, and be disciplined enough with your spending to not to rack up more debt. But, if you can do that and have good enough credit to get approved for a credit card, this is a really powerful way to pay off debt faster.
Compare top balance transfer credit cards.
Extra Long Intro APR on Purchases & Qualifying Balance Transfers
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Current Offer
Benefit from a long introductory APR period on purchases and qualifying balance transfers
Annual Fee
$0
2. Debt consolidation
Best for: Multiple kinds of debt including credit cards, medical, and personal loans
Debt consolidation loans function much like balance transfer credit cards, allowing you to combine all of your loans into one, so only a single monthly payment is required. Essentially, you would take out one loan to cover all (or a selection) of your debts. A debt consolidation loan could be a personal loan, but you could also take out a home equity loan and use it to consolidate your debt.
How this works... Let's say you have debt spread across credit cards and other sources with interest rates ranging from 22% to 32%. You could look for a debt consolidation loan with an interest rate below 22% and use it to pay off all your debt. You now just have the one loan at the lower rate to pay off. With the interest savings, you should be able to pay off your debt faster. Even if you don't save a lot on interest, this technique can be helpful if you feel overwhelmed by having to make a lot of payments every month. Sometimes just having one payment can be a psychological relief.
This approach can help some borrowers save money on debt repayment, but looking at the loan terms carefully is important. While some debt consolidation programs incur higher fees than if you continue to pay minimum payments on multiple debts, the best debt consolidation companies help you pay off debt while incurring nominal fees.
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AmONE Personal Loans Benefits
- Loans up to $50,000
- Min. Credit Score: 600
- APR: 3.99%-35.99% (as of May 31, 2023)
- No Collateral Needed
3. Debt settlement
Best for: Debt over $10,000 with no other options
You can negotiate on your own with creditors to try to lower your overall debt or come up with a payment plan that works for you. But this can sometimes be really overwhelming and difficult. If you want help, there are for-profit businesses called debt settlement companies or debt relief companies that will work with your creditors to negotiate a deal allowing you to pay off (settle) your debt for less than the total amount owed.
If you owe multiple creditors and a debt settlement company has negotiated a settlement with all of them, you will only need to make a single monthly payment to the company that negotiated on your behalf to fulfill the settlement terms. Working with a debt settlement company isn’t free — they'll typically charge fees equal to a percentage of the settled debt.
Debt settlement can negatively impact your credit so I wouldn't recommend it unless you have significant debt (over $10,000), already have pretty bad credit, and feel like you don't have any other options. It can be a better option than bankruptcy or just not paying your debt (which is even worse for your credit.)
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National Debt Relief Benefits
- No upfront fees1
- One-on-one evaluation with a debt counseling expert
- For people with $30,000 in unsecured debts and up
4. Debt snowball method
Best for: Feeling like you're making progress
Developed by personal finance expert Dave Ramsey, the debt snowball method uses small steps to pay off debt. It's more of a psychological approach than a mathematical one.
The idea is to pay off your lowest balance first. Make your minimum monthly payments on all your debt, and apply any additional funds toward the debt with the lowest balance. That way, you will feel accomplished when you pay off one entire line of credit. This psychological boost from quick wins can help keep the momentum going as you pay off the next item in line.
The snowball method gets its name from the fact that once you pay off the smallest debt, you roll the payment you were making on that debt onto the next smallest balance along with the minimum payment you've been making. In this method, each smaller payment continues to add up until you reach the highest balance and begin chipping away at it.
While this method may not work for everyone – especially those who recognize the psychological ploy for what it is – many finance experts swear by it.
5. Debt avalanche method
Best for: Reducing interest payments
Like the debt snowball, the debt avalanche method advises paying the minimum payment on every account balance simultaneously. Then, if you have any extra money, you can apply that amount to the highest-interest debt. When that debt's paid off, you apply the payment you've been making to the debt with the second-highest interest rate, and so on.
Snowball vs. avalanche: which is better?
| Debt snowball | Debt avalanche |
| Start with the lowest balance first | Start with the highest-interest-rate debt first |
| Starts with small wins | May take longer to pay off initial balances |
| May pay more in interest | May pay less in interest |
| Best if you need motivation to keep paying off debt | Best if you want to minimize interest |
Choosing between the debt snowball method and the avalanche method depends on your circumstances.
The primary difference between the two is interest rate versus overall balance. The snowball method concentrates on paying the smallest balance first, regardless of the interest rate, while the avalanche method focuses on reducing debts with higher interest rates.
6. Credit counseling and debt management
Best for: Personalized advice and education
Many finance experts offer services and courses to help you manage your debt. According to the Federal Trade Commission, however, reputable credit counselors are nonprofits and offer services across local and online locations.
Finding a credit counselor can start with a quick internet search for a credit counseling agency in your area. An organization that offers multiple services, such as budget counseling, debt management and savings classes, and in-person consultations, is ideal.
However, visiting a credit counseling organization may incur additional fees beyond your debt payments, even if the agency is a nonprofit. If you enroll in a debt management plan, the organization could negotiate and pay off debts on your behalf, but they may charge for this service.
Also, if your credit counselor recommends a debt management plan, ask plenty of questions before agreeing to the terms. And be sure to seek out an accredited counseling agency.
To start, check out our list of the best credit counseling companies.
Which debt advice should you follow?
If you have multiple accounts and outstanding debts, it can be difficult to choose debt advice to follow. Overall, your choice will depend on the following:
- How much you owe
- How many accounts and what interest rates you have
- How high each balance is
- Your financial goals
For example, if you have multiple low balances, but each has high interest rates, your best option may be debt consolidation or a balance transfer credit card with a long intro APR period. Both options mean fewer interest payments over the long term, and you can pay down low balances faster.
No matter which advice you choose to follow, it’s important to have a debt repayment plan (and stick with it).
Know how much you can afford to spend toward paying down debt each month. Use online calculators to project your long-term spending and savings. Avoid adding to your debt when possible. Consider using small windfalls like tax refunds to pay down your debt further and starting an emergency fund to help prevent you from going into more debt in the future.
Recognize that paying down debt may take years unless you have extra income to put toward the payments. Overall, setting small, short-term goals and making sure to track your progress can keep you motivated and ensure that you keep working toward paying down balances.
9 healthy money habits to avoid more debt
Wondering how to pay off debt faster than your current timeframe? Here are nine strategies that can help you reach financial freedom sooner.
1. Create a budget
To stop increasing debt, you must first limit your spending habits. Make a budget that takes into account your monthly income, monthly expenses, and debt repayment amounts. Then work on sticking with it.
2. Pay more than the minimum
Paying extra on any one account will help you pay it down faster and avoid more interest. Even a few extra dollars per month can make an impact, so when you have extra cash, plan to put it toward your debt. If you want to create more extra cash, consider starting one of the best side hustles or getting a second job, even if it's just part-time.
3. Reduce spending
Cut your spending as much as possible. This ties in with budgeting, as reducing your spending is a comprehensive part of any budget. Cut out unnecessary expenses and put that cash toward debt repayment.
4. Pay more
If you have extra income at the end of each month, put extra payments toward your debt rather than entertainment or other purposes. It’s no fun to skip eating out, but if you put that amount toward a credit card payment, you will soon see the benefits and improve your credit. The same applies to work bonuses or cash gifts.
5. Unsubscribe
As painful as it might be, it’s time to cut ties with those newsletters and alerts that notify you about sales and promotions. Without the temptation in your inbox or mailbox every day, you are less likely to spend on things you don’t need.
6. Hold a sale
If you have unwanted items in your home, consider selling some of the high-ticket items and putting the money toward debt repayment.
7. Reassess the basics
There are often ways to downsize that don’t require huge sacrifices, such as swapping cable TV services for a monthly subscription to Netflix or Hulu, which can cut costs substantially, and eating at home to save cash versus eating out for most meals. You will be surprised at how quickly it adds up after only a short period of time.
8. Find new rewards
Instead of rewarding yourself by buying new things when you reach a goal, consider gifting yourself in other ways. Enjoy your favorite show, cook your favorite meal, or give yourself permission to relax and read a book without any other responsibilities to tend to.
9. Tell friends and family
It may feel embarrassing to admit that you are working on paying down debt, but enlisting the support of friends and family can help you make progress. People around you can keep you from overspending unnecessarily, and knowing that you are trying to save money prevents them from encouraging your bad cash habits.
How to tally up your debt
If you have only one credit card or personal loan payment, it’s easy to see how much you owe at a glance. However, if you’re like most people, you likely have multiple lines of credit and various types of debt.
Here’s how to track down and total it up so you can decide how to pay off debt based on your financial situation:
1. Total up your debt
First, check each account and write down the total amount of your current debts. You may have to dig into some bank accounts or statements to find your current loan amounts. But having every item in front of you at once can help you determine which is highest, how to consolidate multiple debts, and prioritize the most urgent ones. You may also want to note the type of debt it is: personal loan, credit card, auto loan, etc.
2. Calculate your debt-to-income ratio (DTI)
Next, calculate your debt-to-income ratio (DTI). Your DTI compares how much money you owe to how much you earn. Lenders often use this figure to decide whether you qualify for loans or services.
In general, a DTI ratio of 35% or less is manageable. Between 36% and 49% means there’s room for improvement, and 50% or more requires immediate action to resolve.
How to calculate your DTI ratio:
- First, add up all your monthly bills. Include debt payments like credit card balances, student or auto loans, plus rent, alimony or child support, medical debt, and other debt. You can, but don’t have to, include household expenses like utilities and groceries.
- Then, divide the total monthly debt by your gross monthly income. Gross monthly income is the amount of your paycheck before taxes come out.
- The resulting number is your DTI percentage.
3. Check for debt in collections
If you are unsure about how much debt you have, check to see if you have any outstanding accounts in collection. One way to track this down is to check your credit report.
Many financial institutions and apps offer a free credit score, but your bank or credit card company may also provide similar services. You are also entitled to a yearly free credit report from each credit reporting bureau.
Bottom line
The key strategy for how to pay off high-interest debt, no matter how much you have, is to stay motivated. Plan a reward for yourself when the debt drops to zero and maintain a can-do mentality. Before you know it, you’ll have made more progress than you ever thought possible. You will be well on your way to being debt-free.
Extra Long Intro APR on Purchases & Qualifying Balance Transfers
Current Offer
Benefit from a long introductory APR period on purchases and qualifying balance transfers
Annual Fee
$0