Prioritize paying down debt

List your debt.

When figuring out how to get out of debt, start with a list of all your outstanding balances, from smallest to biggest. Note the interest rate for each—the higher the rate, the more you’re paying in interest each month on that balance. 

Follow the “snowball” method.

Do you like celebrating the small wins in life? The snowball method is a popular debt payoff strategy that allows you to do just that. By paying off your smallest balances first, you create a “snowball effect.” This can help you build momentum and free up more cash for tackling bigger balances.

Or follow the “avalanche” method.

On the opposite end of the spectrum from the snowball method, the avalanche method calls for tackling your big debts first. Throw however much you can comfortably manage at the debt that’s costing you the most—typically the balance with the highest interest rate. It may save you more on interest in the long run, but you may not free up cash flow as quickly. 

Consider consolidation.

Have multiple outstanding debts that are challenging to manage? Consolidating your debt with a new loan or line of credit lets you combine several loans into a single balance with a new interest rate. If the circumstances are right, it could lower your monthly payments and save you money over time. 

Pay more than the minimum requirement.

No matter your debt payoff strategy, make more than the minimum payments if you can. This may save you hundreds, or even thousands (depending on the size of the loan), on interest over the life of a loan. Our debt versus savings calculator below can help you see how much you could save with extra payments. 

Shift your debt mindset.

Carrying debt can be stressful. But sometimes it helps to focus on the good things you’ve gained from it, like getting an education, starting a business, or buying a home. Also, focusing on your debt payoff plan and the possibility of a debt-free future is a positive use of your mental energy. 

This mindset can help you feel more confident and at ease with the debt you're carrying. And don’t feel like you have to stick to a debt payoff strategy that isn’t working for you anymore—adjusting your strategy can be a good thing, as long as you’re continuing to pay down debt.