Prioritize paying down debt for more financial freedom

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 what the interest rate is for each—the higher the rate, the more you’re paying in interest each month on that balance. 

The “snowball” strategy

Do you like celebrating the small wins in life? With this popular debt payoff strategy, you can 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.

The “avalanche” strategy

Tackle your big debts first with this payoff strategy. 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 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 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—pay less

No matter your payoff strategy, make more than the minimum payments. This will 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 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. This type of mindset can help you feel more confident and at ease. And don’t feel like you have to stick to a strategy that isn’t working for you anymore—adjusting your strategy can be a good thing, as long as you’re paying down debt and using your credit responsibly.