Step 1: List what you owe
Write down each debt with its balance, interest rate and minimum payments. For example:
| Debt | Balance | Interest rate | Minimum a month |
|---|---|---|---|
| Credit card | $6,000 | 22% | $180 |
| Car loan | $9,000 | 8% | $280 |
| Personal loan | $2,000 | 10% | $90 |
That’s $550 a month of minimums. Say you can pay $200 more, $750 a month in all.
Step 2: Pick a method
Both methods pay the minimum on everything and put the extra on one debt. When it’s paid off, its payment rolls onto the next.
- Avalanche: the highest interest rate first (here, the credit card). It costs the least.
- Snowball: the smallest balance first (here, the personal loan). You clear a debt sooner, which keeps many people going.
Worked out month by month, as in our debt payoff calculator.
The difference between the two methods is small here. What matters most is paying more than the minimums, and keeping at it. Try your own debts in the debt payoff calculator.
Why the minimum isn’t enough
A card’s minimum payment shrinks as your balance does, so paying only the minimum can take decades. Paying a fixed amount instead makes a huge difference:
$5,000 at 22.36%, with no new spending:
| You pay | Time to clear | Total interest | Saved on the minimum |
|---|---|---|---|
| Minimum only | 19 years, 3 months | $8,241 | – |
| $150 a month | 4 years, 5 months | $2,886 | $5,356 |
| $200 a month | 2 years, 10 months | $1,793 | $6,448 |
| $300 a month | 1 year, 9 months | $1,043 | $7,198 |
| $400 a month | 1 year, 3 months | $746 | $7,495 |
| $500 a month | 1 year | $585 | $7,656 |
The minimum is 1% of the balance plus interest, or $25 if that’s more, so it shrinks as the balance does. Credit cards that charged interest averaged 22.36% in August 2026 (Federal Reserve).
Step 3: Pay less interest
- A 0% balance transfer card moves card debt to a card with no interest for a set time, usually for a fee of 3% to 5% of the balance. Pay it off before the 0% ends.
- A personal loan at a lower rate than your cards can replace several payments with one. It only helps if you don’t run the cards up again.
- A home equity line of credit (HELOC) usually charges less than cards, but your home is the security. See the HELOC calculator before you borrow against it.
- Ask about hardship programs: many card issuers lower the rate or payment for a while if you’re struggling.
Step 4: Find more to pay
- Make a budget and give the extra a fixed amount each month. The budget calculator shows where your money goes.
- Put windfalls on the debt: tax refunds, bonuses and gifts.
- Stop adding to it: take the card out of your phone’s wallet, and pay by debit card while you clear it.
Don’t raid your retirement
Taking money out of a 401(k) or IRA before 59½ usually means income tax plus a 10% penalty, so taking out $10,000 can cost around $2,000 to $3,500, depending on your tax bracket. A 401(k) loan avoids the tax, but if you leave your job it can become due quickly, and the money stops growing while it’s out. Use it only as a last resort.
Step 5: Stay out of debt
Once a debt is gone, keep paying the same amount into savings. An emergency fund means the next surprise bill doesn’t go back on a card. If you can’t keep up with your payments, get free help early: see help with debt.