How to Get Out of Debt
Proven methods used by millions to become debt-free. Choose the strategy that fits your personality, finances, and goals.
Choose Your Debt Payoff Strategy
There's no one-size-fits-all approach. The best strategy is the one you'll actually stick with.
The Debt Snowball Method
Best for: Motivation & quick wins
Made famous by Dave Ramsey, this method focuses on paying off your smallest debt first while making minimum payments on everything else. Once the smallest is gone, you roll that payment into the next smallest.
✓ Advantages
- Quick wins build momentum and motivation
- Simple to understand and implement
- Behavioral psychology supports this approach
⚠ Considerations
- May pay more in total interest than other methods
- Not mathematically optimal
Step-by-Step:
- 1List all debts from smallest to largest balance
- 2Make minimum payments on all debts except the smallest
- 3Put every extra dollar toward the smallest debt
- 4When that debt is paid off, add its payment to the next smallest
- 5Repeat until all debts are paid
The Debt Avalanche Method
Best for: Saving the most money
This mathematically optimal approach targets the highest-interest debt first. While it takes longer to see your first payoff, you'll save the most money in total interest over time.
✓ Advantages
- Minimizes total interest paid
- Mathematically the fastest path to debt freedom
- Best for large, high-interest debts
⚠ Considerations
- Slower psychological wins
- Requires more discipline to stick with
Step-by-Step:
- 1List all debts from highest to lowest interest rate
- 2Make minimum payments on all debts except the highest-rate one
- 3Put every extra dollar toward the highest-interest debt
- 4When that debt is paid off, add its payment to the next highest-rate debt
- 5Repeat until all debts are paid
Debt Consolidation
Best for: Simplifying multiple debts
Combine multiple debts into a single loan with one monthly payment, ideally at a lower interest rate. This can be done through personal loans, balance transfer credit cards, or home equity loans.
✓ Advantages
- One monthly payment instead of many
- Potentially lower interest rate
- Fixed payoff timeline
⚠ Considerations
- May require good credit to qualify for best rates
- Doesn't reduce the total amount owed
- Risk of accumulating new debt on freed-up credit cards
Step-by-Step:
- 1Calculate your total debt and average interest rate
- 2Research consolidation loan options and compare rates
- 3Apply for a consolidation loan or balance transfer card
- 4Use the funds to pay off all existing debts
- 5Make consistent payments on the new single loan
Balance Transfer
Best for: High-interest credit card debt
Transfer high-interest credit card balances to a new card offering a 0% introductory APR period (typically 12-21 months). This gives you a window to pay down principal without interest accumulating.
✓ Advantages
- 0% interest for promotional period
- Can save hundreds or thousands in interest
- Simplifies payments if consolidating multiple cards
⚠ Considerations
- Balance transfer fees of 3-5% apply
- Requires good to excellent credit
- High rate kicks in after promo period ends
Step-by-Step:
- 1Check your credit score — you'll typically need 670+
- 2Compare balance transfer card offers and fee structures
- 3Apply and transfer existing balances
- 4Create a payoff plan to eliminate the balance before the promo rate ends
- 5Avoid making new purchases on the card
Go Deeper on Each Method
Want to see how the two most popular methods compare with your own numbers? Use our free interactive calculator and method guides.
Essential Financial Habits
Before choosing a payoff method, build these foundational habits to set yourself up for success.
Create a Zero-Based Budget
Give every dollar a job. Track income and expenses so you know exactly where extra money can go toward debt payments.
Build a Small Emergency Fund First
Set aside $1,000-$2,000 before aggressively paying debt. This prevents you from going deeper into debt when unexpected expenses arise.
Stop Taking on New Debt
Cut up credit cards or freeze them (literally). You can't fill a hole while you're still digging. Switch to cash or debit for daily purchases.
Automate Your Payments
Set up automatic payments for at least the minimums on all debts. This ensures you never miss a payment and damage your credit score.
Ready to Take the Next Step?
If you own a home, one of the most powerful debt payoff tools available is your home equity. Learn how homeowners use cash-out refinancing to pay off credit card debt at a fraction of the interest cost, or compare the full range of debt relief options available to you.
Educational content only: The information on this website is for general educational purposes and is not financial, legal, or tax advice. Individual circumstances vary. Always consult a licensed professional before making financial decisions.