How to Stick to a Debt Payoff Plan
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Dealing with debt isn’t very fun. And if you see no end in sight, it’s hard to stay motivated. While debt is a normal part of life for most Americans, it can also hold you back, hinder your savings goals, and prevent you from buying a home or even covering emergency expenses. And once you’re in debt, it can be difficult to get out.
Of course, not all debt is equal. While some debt like a student loan, home loan, and car loan provide you with the services and goods you need to navigate your career, and everyday life (in a sense, they’re more of an investment), credit card debt specifically can hurt your credit score, cost you more money in interest, and bury you in a mountain of debt that feels impossible to escape.
Creating a debt payoff plan is the best way to determine how to make a dent in your debt. A debt management plan can help you combine medical debt, personal loans, and credit card debt into more manageable payments. But finding the right one for your personal financial situation can feel daunting.
And, once you have found a method, sticking to it may be challenging — especially if it seems like there’s no end to your debt in sight. But there are small victories you can celebrate along the way, helping you stay motivated while remembering your ultimate goal of becoming debt-free.
If you’re considering a debt repayment strategy, here are some of my favorite methods to consider and some tips to help you stay on track.
In this article
Popular strategies for debt repayments
Repaying your debt can be overwhelming. Start by creating a budget to understand your living expenses, and other non-essential money going out of your account, and scale back where possible. Then figure out how much money you have left over to repay your debt. A little financial planning can go a long way.
While the ultimate goal — eliminating your debt — is clear, how you get there will look different for everybody. While making minimum monthly payments may be all you can afford, understanding how interest rates and other fees impact your overall debt is key to make smarter decisions about where your money is going.
Here are some popular methods to consider, no matter your financial situation, types of debt, or how much or little you can afford to put towards your debt.
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1. Avoid more interest using the debt avalanche method
If you’re already managing your minimum payments but want to make more of a dent in the amount of interest you’re paying to reduce your debt faster, this is one of my favorite techniques.
Primarily helpful for credit card debt, the debt avalanche method focuses on paying down the accounts with the highest interest rates first while maintaining at least your minimum monthly payments on all other accounts.
So, let’s say your debt consists of four credit card accounts with the below balances and annual percentage rates (APRs):
Debt Account | Balance | APR (interest rate + fees) |
Credit Card A | $1,000 | 16.99% |
Credit Card B | $3,000 | 19.99% |
Credit Card C | $500 | 14.99% |
Credit Card D | $2,500 | 20.49% |
Using the debt avalanche method, you would make minimum payments for all three accounts and apply extra money to Credit Card D first since it has the highest APR of 20.49%. Once Credit Card D is paid off, move on to Credit Card B, then A, and then C.
If you’re the most motivated by avoiding as much interest as possible — paying the least amount to eliminate your debt — this strategy is worth considering.
Of course, while the method can help you save the most in interest, it can take longer than other methods to pay off accounts in full. If you know you’re motivated by fast wins, the next method might be more to your liking.
2. Stay motivated using the debt snowball method
Another popular way to pay down your debt is to prioritize your smallest balances first — regardless of interest rates. What I like most about this method is that it allows you to experience wins earlier in the process, which may help you stick to the plan.
So, using the same example above, if your debt consists of only those four credit card accounts, you would pay the minimum (or more) on all and then apply extra money to the card with the $500 balance. This allows you to pay off your first card much faster than you could with the debt avalanche method and may keep you motivated to continue.
Once your first card is paid off, continue to pay the remaining next smallest debt, one by one, until they’re all eliminated.
This is also a helpful strategy if you have a mix of large and small debts. For instance, if you have a few smaller credit card balances and larger student loans, this method can help you eliminate credit card debt fast and then let you focus on larger accounts.
Again — I can’t stress this enough — always ensure you’re at least paying the minimum due on all of your debts when employing any method. This helps you avoid late fees and penalty APR charges.
3. Divide and conquer
If sticking to a rigid method sounds like hard work, you can simplify your approach. First, gather a list of your debts and figure out how much you need to pay to meet the minimum monthly payments. Add this up to get the total amount.
Let’s say this is your personal finance scenario:
Debt Account | Balance | Minimum Monthly Payment |
Credit Card A | $1,500 | $25 |
Credit Card B | $5,000 | $40 |
Car Loan | $6,000 | $250 |
Student Loan | $10,000 | $125 |
Total | $22,500 | $440 |
In this situation, you’re making $440 in payments each month, at minimum. Find out how much extra you can apply each month. Let’s say it’s $200. In this case, you can split this money by the number of accounts (4) and pay $50 extra each month.
This way, you don’t have to worry about which one has the lowest balance or highest APR. You can even set up automatic payments and watch as your balances drop.
And you can make it even easier and only make extra payments when you have extra money saved. Remember, a debt management plan doesn’t have to be complicated to work. You just have to make your minimum payments and add a little on top to really watch your debt decrease.
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- Subject to qualification and approval. $1,500 monthly income required.
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4. Dodge interest with a balance transfer card
No one wants to pay more interest than they have to. If you’re dedicated to paying down your debt — and believe you can do so in 1 to 2 years, a balance transfer credit card could help.
A balance transfer card is a credit card that lets you move other credit card accounts onto it, effectively paying off your other balances with a lump sum payment. It can be a good strategy for eliminating credit card debt. It’s not helpful if you’re looking to pay off other types of debt. It works by offering you a low or no-interest introductory rate period — usually 12 to 24 months. This can offer you more time to pay down your debt interest-free.
However, this method is not without its risks. If you can repay your debt before the introductory period ends, your interest rate will shoot up, potentially costing you more in interest over the long term. In addition, you’ll also usually pay a balance transfer fee between 3% and 5% of the balance transferred.
Also, you’ll need fairly good credit to get approved for a credit limit covering all of your balances. If you have $10,000 in credit card debt, for instance, you could end up being approved for a lower line, like $6,000, that doesn't cover your needs.
Check out our recommendations for the Best Balance Transfer Cards of 2022.
5. Stop juggling accounts and get a debt consolidation loan
Managing multiple debt accounts can be overwhelming. It’s also easy to miss a payment if you have more than one account — particularly if you incorrectly assume they’re all set to autopay.
If you have a few different debt accounts with varying interest rates and payment due dates, make life a little easier by applying for a debt consolidation loan. A type of personal loan, a debt consolidation loan, allows you to pay off your existing debts in one lump sum while moving your total debt balance into one loan.
This won’t reduce your debt, but you may find you’ll save a little on interest. And streamlining your debts onto one account can make it easier to ensure you pay on time and stay focused on chipping away at your debt.
Be sure to look for personal debt consolidation loans that offer rates lower than your current debt and allow you to apply for the total amount you need. Keep in mind the Federal Reserve has raised interest rates several times this year, so interest rates for personal loans are continuing to rise. Applying now may help you lock in a lower rate than applying later in the year.
And, on that note, if you are looking to consolidate personal loans, you may want to try refinancing instead. Refinancing can offer you a lower interest rate or monthly payment that may better fit into your monthly budget.
Check our lender recommendations for Best Debt Consolidation Loans.
Other tips to stay motivated while paying down your debt
To keep yourself on top of your debt, it’s best to understand what motivates you — and how you like to see your progress.
I recommend setting aside some time each week or month (it’s up to you!) to review your finances. Take a look at your debt accounts and compare where you were last week (or month) to where you are now.
Then, check out your credit score. You can view it for free through Experian, and some credit cards (like Capital One) also offer credit score access. As you pay down your debt, your debt utilization rate (how much debt you carry versus how much credit you have access to) will shrink, boosting your credit score. When applying for a home or other loan, most lenders want a credit utilization score of 30% or less. Check-in on your credit regularly to see how sticking to your debt repayment plan is helping improve your credit profile.
It’s also helpful to see how your financial plan is helping you work towards other goals. For instance, after paying off your first debt, maybe you were able to put more money towards building an emergency fund or planning that vacation you’ve been dreaming of since early 2022.
If you’re motivated by social acknowledgments, share your debt journey on social media. Or, reach out to a friend or family member you trust, let them know about your financial goals, and ask them to check in with you regularly. You may even have a friend who wants to go on a debt-busting journey with you.
Lastly, if you need help, ask for it. Reach out to a trustworthy credit counseling service, financial advisor, or someone in your network who’s good with their finances. Don’t be afraid to ask questions. Speaking up can help you avoid costly mistakes — it’s the best way to learn. Don’t give up for fear of not knowing the answer.
Relieve $25k+ in Credit Card Debt or Personal Loan Debt With TurboDebt
- Relieve $25k+ in credit card debt or personal loan debt with this special relief program.
- TurboDebt has a Trustpilot rating of 5/5 based on 1288 reviews
- Subject to qualification and approval. $1,500 monthly income required.
- Apply in 5 minutes. If you qualify, chat online with a friendly online debt representative.
The bottom line
There’s no one-size-fits-all approach to paying down your debt. You have to find the method that works best for you, and that keeps you motivated. Explore all of your debt repayment options to find your best path forward, hold yourself accountable, and check in regularly to review your progress.
Keep going — you’ve got this.
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Writer
Courtney Johnston is a freelance writer, specializing in finance, travel, and health. She has written for The Chicago Tribune, Benzinga, BestReviews, Mashvisor, Fundera, MoneyGeek, and The Culture Trip. She also teaches writing instruction at the University of Indianapolis. Courtney currently resides in Indianapolis.
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