Top 5 Strategies To Get Rid Of Debt

Debt is a burden that besieges personal finances until it’s fully cleared and gone. If you’re struggling with debt, whether it’s only a few dollars or has many zeros, these top five strategies can help you get rid of your outstanding balances.

The Avalanche Method

The avalanche method tallies all your debts, listing them from highest interest rate to lowest. The outstanding balances are then paid off from the highest interest rate to the lowest. Minimum payments are made on every loan and other debt, and any extra available funds are put toward the highest-interest loan. The avalanche method is so named because it proceeds much like an avalanche. The method is slow to begin, but it gains a lot of power by the time you’re working on lower-interest debts. Of all the debt elimination strategies, the avalanche is the most math-oriented. You avoid excess fees by making minimum payments on everything. Interest paid is minimized as much as possible, because you pay off the highest-interest debts first.

The Snowball Method

The snowball method likewise tallies all of your debts, but it lists them and pays them off in a different order than the avalanche method does. If using the snowball method, you list debts in order of smallest to largest balance — irrespective of what their interest rates are. Minimum payments are still made on all debts, and any extra funds are put toward the smallest outstanding balance. Proponents of the snowball method readily admit that it mathematically results in a less efficient approach to paying off interest. Instead, the method focuses on the emotional side of debt elimination, helping you gain momentum as you see progress made quickly. By the time you’re ready to focus on the largest debt, you’ll have completed many successfully paid-off loans.

The Savings Quick-Fix

If you have any savings built up, immediately paying debt off with the funds can be tempting. It also can make sense if you have high-interest debt and a large sum saved up. Before using savings to pay off debt, however, there are a couple of cautions:
  • Tax-advantaged accounts (i.e., IRAs, Roth IRAs, 401(k)s, 529s, HSAs, etc.) should only be used in extreme cases, such as foreclosure and bankruptcy. Pulling funds out of these has severe tax implications.
  • Cash savings shouldn’t be depleted to an unsafe level. This level depends on your bills and living situation, but you should still be able to handle the unexpected financial emergency.
If you meet these criteria, feel free to pay off debt with savings.


Bankruptcy is sometimes considered a magic bullet that gets you out of debt. It should only be a last resort, however. Declaring bankruptcy will leave a black mark on your credit history for years, making getting a home mortgage, business loan, or other funding difficult. Not all debts are eliminated in bankruptcy, either. Notably, federally guaranteed student loans follow you through bankruptcy.

Credit Settlement

Credit settlement allows another party to negotiate debt pay-offs on your behalf. Minimum payments are suspended, and you pay the settlement agency an agreed-upon monthly payment. The agency then uses these funds to negotiate debt pay-offs for less than is owed. For help with credit counseling that’s needed after debt problems, contact us at Free Credit Repair.