The average American has $96,371 in debt, including student loan, mortgage and credit card balances. Whether your debt is more or less than that amount, it can feel difficult to manage.

Even if you’re struggling to make a dent in your outstanding balances and stay afloat financially, there are options to help you find relief. You can use the specific strategies discussed in this guide, like the debt snowball or avalanche, or consolidate what you owe to break the chains of debt bondage.

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Strategies for paying off debt

It may have taken just a few months of unemployment or excess spending to get into debt, but it will likely take longer than that to pay it off. It’s important to commit to a plan and not get discouraged by any setbacks. Remember, slow and steady wins the race toward a zero balance.

Regardless of how you got into debt, you’ll need a plan to pay it off. Consider these strategies to help you get started.

1. The debt snowball

The debt snowball method builds momentum as you start repaying creditors, like rolling a snowball across the ground. Begin by paying off debts from smallest to largest. List debts by balance and start with the smallest one. Make sure to pay minimums on all other bills and send extra cash to the debt with the smallest balance until it’s paid in full.

Repeat this strategy with the other debts. As you pay off balances, you’ll free up more funds for other debts. Plus, it’s encouraging to see progress and can keep you on track to see debts vanishing.

Who this is best for: The debt snowball is best if you want to experience quick gains when paying off your debts.

2. The debt avalanche

The debt avalanche strategy takes a similar approach but instead orders debts by interest rate. First, you make a list of all your debts from the highest interest rate to the lowest. You then concentrate on paying off the highest-interest debt first while making minimum payments on all the other debt. This cuts back on the amount you’re paying in interest, which also frees up more cash to pay down other debt.

Who this is best for: The debt avalanche is suitable if saving a bundle in interest is a priority, and you’re motivated to get out of debt quickly.

3. Debt consolidation

If it becomes too challenging to keep up with various payments and due dates, consider debt consolidation. A personal loan or a new balance-transfer credit card could be used for this purpose.

With debt consolidation, the lender pays off all your existing debts and rolls them into one new loan with one payment. While the new interest rate may be higher than some of your other bills, you could wind up saving money by avoiding missed and late payment fees.

To determine if it’s a smart strategy for your situation, you’ll need to calculate your blended interest rate. It’s the combined interest rate paid on all your debts. It’s calculated by summing the total interest you’ll pay in a year and dividing it by the entire principal owed. Or, you can use our debt consolidation calculator.

Even though the rate on a debt consolidation loan can be quite high, it could still be lower than the blended rate you’re already paying, in which case a debt consolidation loan would be a good choice.

Who this is best for: Consider debt consolidation if you can commit to not using your credit cards or acquiring more debt while you work to pay off what you owe.

4. Debt management plan

Nonprofit credit counseling agencies can help set up a debt management plan with debtors. An agency will negotiate concessions on your behalf with the companies that you owe money. This could entail arranging for lower payments, setting up reasonable repayment plans and possibly securing debt forgiveness.

Who this is best for: Debt consolidation could be a viable option if you struggle to keep up with your minimum monthly payments and prefer a plan that can help you pay less in interest and get out of debt faster.

Tips for paying off debt

Once you have a debt payoff plan in place, follow these tips to stay on track.

1. Stick to a budget

Whatever strategy you choose for paying off debt, you’ll need a budget. Otherwise, it’s too easy to get off track. With a budget, it’s easy to see where each dollar is going, which will help you identify areas where you could cut costs and save money.

Whether you use an app or a spreadsheet to create a budget, once you see all your income and expenses laid out, you can start planning for how to pay off debt. Subtract your fixed expenses from your income – that’s your free cash flow. That money is what you have available to cover variable costs and pay down debt.

2. Start an emergency savings account

There’s nothing like an unexpected car repair coming to ruin all your plans to get out of debt. Life will continue to happen while you’re focused on how to pay off your debt, which is why you need an emergency savings account.

As much as you may want to put every extra penny toward your credit card balance, if you’ve

paid off half your balance but then can’t pay for an emergency, you’d just have to charge it again. Most experts advise having three to six months’ worth of living expenses in savings, so when you’re putting your budget together, it should include a line item for savings.

3. Reduce monthly bills

If you’re wondering how to pay off debt and save, consider ways to reduce monthly bills. Lowering monthly expenses frees up money that can be put toward paying down debt.

Are there any unnecessary expenses that can be cut? Maybe drop Netflix or cable for a few months to save money and free up time for a side hustle. If the heating bills have been out of control, many utility companies offer free energy audits, which would identify changes you could make to curb utility costs.

4. Earn extra cash

Having a side hustle has almost become an American institution, right up there with apple pie. Many people now maximize free time by making jewelry to sell on Etsy, driving for a ride-sharing service or dog-sitting. The answer to “how do I pay off my debt?” could be brainstorming ways to earn extra cash.

What are your hobbies? Do you have any special skills you could monetize? Which side gigs would work with your daily schedule? Find a way to secure extra cash flow and apply those earnings to paying off debts.

5. Explore debt relief options

Debt relief companies make grand promises to help solve problems like how to pay off debt, but do they deliver? Yes and no. When you sign up to work with a debt relief company, it negotiates with your creditors to settle or attempt to change the terms of your debt. But there is a catch.

Debt relief companies charge fees for services. To increase a creditor’s willingness to negotiate, the company may urge clients to stop making payments on their bills. But this will lead to late fees, interest charges, and other penalties that increase debt and hurt credit scores.

The companies can also help settle or manage some bills, but they could ultimately do more harm than good. Explore all other options before deciding to work with one.

The bottom line

There are many different strategies and options for paying off your debts. Research the different approaches, including the debt snowball method, the debt avalanche and debt consolidation to find a tactic that is likely to work best for you.

Once you get started, it’s important to establish a budget and an emergency savings account to help ensure your debt doesn’t grow out of control once again.

Frequently asked questions

  • While there’s certainly no requirement that you use a debt payoff strategy, one of these approaches can help you attack your day more effectively and pay it down more quickly.
  • The best strategy will depend on your debt picture and financial habits. For some people, the debt snowball may work more effectively. For others, the avalanche approach or a consolidation loan may be more effective. The key is to investigate each option, consider your circumstances and select an approach that is likely to work best for you.
  • A debt consolidation loan may be worth it if you have a lot of different debts and are having trouble keeping track of all of your bills each month. Streamlining your debts in one loan can also give you a specific repayment timeline. But it’s also important to consider the fees and interest rate associated with a consolidation loan.Crunch the numbers and compare the interest rate on the consolidation loan to what you’re currently paying on your debts to make sure you will truly save money.