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12 Ways to Get Out of Debt

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Editor’s Note: This story originally appeared on NewRetirement.

Debt levels have climbed to an all-time high. Reducing this financial burden is a very worthy goal.

Not sure how to get out of debt? You have options. Use this article to get motivated and find a way to approach your debt that feels right for you and your priorities.

There are quite a few methods for getting out of debt. Some require brute force, others discipline, and there are even methods that are fairly passive and pain free.

Find the right way for YOU to get out of debt.

1. The Debt Snowball

Woman cutting up a credit card
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Endorsed by Dave Ramsey and many other personal finance gurus, this works. What is it? It is a debt snowball!

Start with your smallest debt and pay it off as quickly as possible, all while making the minimum payments on all the other debts. When your first debt is gone, apply that payment to the next largest debt.

Follow this pattern until you officially slay the dragon and all debts are paid.

Why is this my favorite? Because people stick with it.

When you pay off a debt and strike it off your list, something inside you just goes berserk with enthusiasm. You want to do it again! “What’s the next debt? Let’s kill that one too!”

And you just go absolutely nuts until all the debts are completely gone.

2. The Debt Avalanche

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What does the debt avalanche do that the debt snowball doesn’t? It considers the interest on your loans. The debt avalanche applies a different methodology for how to get out of debt:

Instead of ordering your smallest debts to your largest, you pay them off from the largest interest rate to the smallest.

Maggie McGrath does some great analysis on Forbes if you’re interested in the math and want to get your nerd on, but apples to apples, the avalanche does pay off debts faster than the debt snowball.

However … fewer people make it through this plan because you don’t see the immediate wins to keep you motivated. If your highest-interest loan is your $20,000 maxed-out credit card, it might take you a full year to pay it off.

By that point, most people have lost motivation and moved onto the next shiny object of life.

If you’re super nerdy and determined to get rid of your debt, the avalanche will probably work for you. If you need the small wins to pep you up and put that spring in your step, use the debt snowball.

3. Loan Consolidation

Debt Consolidation Loan
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If you have a few debts that have a high interest rate, and if you’re more passive about getting rid of them, then setting up a simple loan consolidation might be your best bet.

Set up the term length, negotiate the new, lower interest rate, and you’ll get rid of your debts at a pre-determined time — hopefully long before your retirement date.

It’s not the most effective way to pay off your debts, but it is better than ignoring your debts entirely.

4. Transfer Balances to a Low or Zero Interest Credit Card

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Depending on your credit score and debt burden, you may be able to transfer your debts onto a zero interest credit card and really focus on paying down the balance as quickly as possible — preferably before the introductory interest rate resets to a higher rate.

This is great if you are committed to truly getting rid of the debt.

5. Talk to Your Creditors About a Lower Interest Rate

Couple in a cafe with a credit card
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Particularly with credit card debt, you may be able to talk with your creditor and ask them for an interest rate deduction.

The worst they can say is no. And, it doesn’t hurt to ask.

6. Try Negotiating a Settlement

Frustrated woman with credit card on laptop
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Your creditors want you to succeed. They make money when you are able to pay back the loan.

If they think that you won’t be able to pay back the money you owe them or if they think they can get their money back faster, then they may be willing to make it easier for you.

Before negotiating, make sure you know exactly how much you can pay back and in what time frame. Be prepared to demonstrate to the creditor how exactly you are going to be successful.

Prepare a compelling argument for why they should reduce the total amount of what you owe.

7. Refinance Your Mortgage

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If you have a mortgage, it may be incredibly profitable for you to refinance into a lower interest rate.

Just be sure to consider closing costs.

8. Refinance Your Home and Consolidate Other Loans Into Your Mortgage

Mortgage loan refinance
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If you have a mortgage and additional debts, you can really take advantage of low interest rates by refinancing your mortgage and securing a home equity line of credit (HELOC) at the same time.

The refinancing can lower the interest rate on your mortgage. Assuming the HELOC is at a lower rate than your other debt, you can your HELOC funds to pay off other higher interest loans.

9. Ramp Your Earnings

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Being in debt can be a great motivator to find ways to earn more money. The extra cash from a side gig or a raise can help you pay off your debt.

And, bonus, when you no longer have those payments, it will be easier for you to save for retirement!

10. Cut Existing Expenses

Couple determined to cut expenses
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If ramping your earnings does not seem to be an option, but you really want to accelerate your debt payments, you should consider cutting existing expenses and using those savings toward your debt.

It is not exciting or tricky, just the old fashioned, tried but true method of eliminating debt.

11. Commit to Getting Out of Debt

Happy older woman relieved she can manage her credit card debt
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How do you get out of debt? You simply commit to getting out of debt! As your mom might have told you: where there is a will, there is a way.

12. Stop Saving and Pay Off the Debt

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Yes, you need to be saving money. You definitely need to save and invest those savings. However, it may be a better short-term financial decision to stop saving and use the funds that you would otherwise be socking away to pay off your debt.

This is a good strategy if you have debt with high interest rates.

You may want to compare the interest rate on your debt to the rate of return you could earn on savings for a quick assessment of where to put your money. Put your finances toward the higher rate.

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