Debt Payoff Strategies

Whether it’s student loans, credit cards, medical bills, or mortgages, nearly everyone has at least some debt. Debt isn’t necessarily a bad thing, especially if it will open opportunities for you down the road. But regardless of the kind of debt, you will need to figure out a financial strategy to tackle it. Talk with a financial advisor to see which of the below strategies works for your personal situation.

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Six Strategies to Deal With Your Debt


Avalanche Method

The avalanche method is usually the most money-effective way of paying off your debt. Here’s how it works: First, list out all your debts. Include the amount of the debt as well as the interest rate. Then, organize them from highest to lowest interest rate. Begin by paying off the debt with the highest interest. As soon as you’ve knocked that one out, take the money that had been going toward that first debt and begin paying it toward the second. As soon as the second debt is paid off, you take the amounts that you were paying toward the first and second debts and begin paying off the third, and so on. Your debt payments keep getting bigger until they are an avalanche paying off your very last bill.


Snowball Method

This method is similar to the avalanche method. However, rather than ordering your debts from the highest to the lowest interest rate, you organize them by the amount of debt, smallest to largest. This may not be the most mathematically efficient way to pay off what you owe, but it is actually a more successful strategy for most people. The key to the snowball method is the emotional win. You pay off your smallest, easiest debt first— congratulations! It’s a rush of dopamine that keeps you motivated. The amount that you’d been paying to that first small debt then starts going toward your next debt, and the amount continues to snowball until you’re financially free.


Balance Transfers

Balance transfers can be daunting, but they can have some great advantages. A balance transfer is when you move debt from one area to another—usually from one credit card to a different one. There are several reasons you might want to try this strategy. If you can move debt from a high-interest credit card to a lower-interest one, you’ll be saving yourself money. Some new credit cards offer benefits, such as airline miles or cash back points. But be careful—balance transfers can have hidden transfer fees. A balance transfer also means that you’ll be carrying a monthly balance on your credit card, which can hurt your credit score. But with the help of a savvy financial advisor, you can avoid the pitfalls and use the advantages of a balance transfer to pay off your debt faster.


Personal Loans

If you need to pay off debt immediately or you don’t have a great credit score, you could take out a personal loan. You can get a personal loan from a bank or credit union. Usually, these loans are for a fixed amount, which you then pay back in equal installments over a predetermined amount of time. However, these loans usually have high interest rates, and some of them have a penalty if you pay them off early.


Debt Settlement

Debt settlements involve a third-party company. The debt settlement company negotiates with  your creditors. Together, they strike a deal: If you can make a lump-sum payment of a certain amount, they’ll let go of the rest of the debt. The lump sum is less than what you originally owe, so it’s an advantage that way. However, there’s no guarantee that the debt settlement company can make a deal, and there are lots of scam companies out there. Talk to a financial advisor before attempting a debt settlement to see if it’s worth the risk.



If you have no other options and are certain that you’ll never be able to pay off your debt, you can declare bankruptcy. This is a legal process where a judge determines if you qualify, and if you do, which debts you do and don’t have to pay. It’s a chance for people hopelessly in debt to get a fresh, clean start. However, it will have permanent financial consequences.

Consult a Financial Advisor to Find the Debt Payoff Strategy That’s Best for You

A financial advisor has experience with different types of debt payoff strategies. With their expertise, you can figure out which option will be best for your long-term success. Depending on the type of debt, financial freedom may be easier to achieve than you think. If you’re ready to start paying down your debt, get a consultation with a financial advisor today