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Debt can be a frustrating problem. If you’re in debt, know that you’re not alone. The average American has $38,000 in personal debt, excluding what’s owed on a mortgage.

But if you’re in debt, it doesn’t have to be your reality forever. Here’s how you can pay off your debt for good.

How To Pay Off Debt Fast

When it comes to paying off debt, there are often two methods that people recommend: the snowball method and the avalanche method.

The Avalanche Method:

With the avalanche method, the process prioritizes paying off debt with the highest interest rate. So that credit card debt with a 22% interest rate would be prioritized over paying off your student loans with a 5% interest rate, no matter what the balance is.

To use the avalanche method, you’d first make all of your required minimum payments – this is important! You don’t want to skip out on making required payments.

Next, you’d put any extra money that you can toward the debt with the highest interest rate. Once that is paid off, you’d move put extra money toward your debt with the next highest interest rate. The idea is that by paying off your debt that has the highest interest rate first, you’ll spend less in interest.   

What does this look like in action? Let’s say that your outstanding debt is made up of these amounts:

  • Student Loan: $15,000 – 5%
  • Auto Loan: $5,000 – 4%
  • Credit Card: $7,000 – 22%

Under the avalanche method, you’d make all required debt payments and then prioritize paying off your debts in the following order:

  1. Credit card debt – $7,000
  2. Student loan debt – $15,000
  3. Auto loan – $5,000

All the extra money you can put toward your debt would first go to your credit card. Once that’s paid off, you’d put the extra money to your student loan. And finally, you’d put the extra money to your auto loan once the other two debts have been paid.

The Snowball Method:

Another popular debt payoff method is the snowball method. Rather than prioritizing your debt with the highest interest rate, you’d pay off the smallest debt first. The idea behind this method is that you’ll be able to see your progress faster and become more motivated. You’ll likely pay more in interest, but this approach may give you the motivation to keep going on your debt payoff journey.

To use the snowball method, you’d again make all of your required minimum payments first.

Next, with any remaining money, you’d put it all toward your smallest debt balance.

Let’s go through the same example as above, but using the snowball method. Your outstanding debt is made up of these amounts:

  • Student Loan: $15,000 – 5%
  • Auto Loan: $5,000 – 4%
  • Credit Card: $7,000 – 22%

Using the snowball method, you’d pay off your debt in the following order:

  1. Auto Loan – $5,000
  2. Credit card – $7,000
  3. Student loan – $15,000

Even though your auto loan has the lowest interest rate, you’d work on paying it off first because it has the smallest outstanding balance.

Additional Tips For Paying Off Debt

Picking a method to pay off your debt is a smart step, but there are a few other things you’ll want to do before you fully jump into your debt payoff plan. 

  • Get a realistic sense of your budget: Before you know how much money you can afford to put toward your debt payments each month, you need to know your budget. How much do you make and how much do you spend? Knowing that will set a realistic expectation for how quickly you can pay off your debt.
  • Cut costs: Once you’ve laid out your budget, is there anywhere you can cut costs? Every dollar you avoid spending is another dollar you can put towards your debt. Take a hard look at your spending and decide what you can cut out during your debt repayment.
  • Earn more: One way to speed up your debt repayment is to earn more money. Is there a way you can earn just a little more each month? Maybe it’s taking on more hours at work or dog sitting occasionally that can add a little more money to your debt repayment.

How To Pay Off Debt And Save

Is it possible to both pay off debt and save money? Absolutely. Paying off debt doesn’t need to be an all or nothing approach. It’s a good idea to balance putting money aside for your retirement and emergencies while also paying down your debt.

Depending on how much debt you have, it may take you years to pay it off. Putting off saving during that time can actually lead you right back into debt. If you don’t have a stash of cash ready to be used on a rainy day (like when your car breaks down), you’ll end up adding to your debt … which is exactly what you want to avoid.

When you review your budget and create your debt repayment plan, put aside a little extra money each month into a savings account. While it may be tempting to put every available dollar to your debt, there will come a time that you’re thankful to have savings to fall back on.

How To Pay Off Debt On Credit Report

If you’ve been getting calls from a debt collector, your missed debt payments likely mean that your debt has gone to collections. That means the company you owe money to has enlisted someone to try and recover what you owe.

The Consumer Finance Protection Bureau recommends a three-step process for paying your debt that is in collections.

Step 1: Get Details About The Debt

Before you begin debt repayment, you’ll want to know who you owe the debt to and how much you owe. If you don’t think the debt is accurate, this is the point where you would dispute it.

Step 2: Create A Repayment Plan

Many creditors are open to negotiating with you – they want to get as much money back as possible and working out a payment plan is in their best interest. Before you create a payment plan, it’s a good idea to review your financial situation and decide how much of the debt you can pay off under what timeline.

If you don’t know the best way to do this, a credit counselor can help.

Step 3: Negotiate

Once you have a plan you feel confident you can achieve, it’s time to negotiate with the debt collector. Lay out the plan for repayment, including how much you’ll pay and how you’ll pay it. Once you come to an agreement with them, get it in writing before you start making payments.

Paying off debt is a journey, but it’s one that’s worthwhile in the long run. 


This article is a part of the Her Wallet series. Her Wallet is a home and finance series for women who want to make the most of their money and lifestyle. For more information, visit QuickenLoans.com/blog/HerWallet.

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