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Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

by Fiona Smith
Updated April 2, 2025

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There are many guides out there on how to get out of debt fast, but here’s what makes this one unique:

I’ve used the exact strategies in this blog post to help my clients pay off $100,000s in high-interest debt.

And in this post, I’m going to share with you the same 9 ways to get out of debt that I gave to my clients so you can do the same.

Before we dive into the 9 strategies on how to get out of debt fast, I think it’s important to reveal my 3 rules for getting out of debt and staying out of debt permanently:

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

It’s that simple.

If you spend as much (or even worse – more than) you earn, your chances of getting out of debt are very slim, if any.

Now that you know my rules, let’s dive right in!

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

1. Understand Your Current Debt

Before you even think of pulling out your checkbook and start paying toward your debt, it’s so important to understand your current debt position.

Before you pay off your debt, know how much debt you are in.

If you want to know how much debt you are in, it’s time to figure out your net worth.

If you haven’t tracked your net worth yet, then check out my free net worth statement template below.

It’s basic but it also gets the job done.

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

Free Net Worth Template

Your net worth will help you gain a better overview of your debt picture.

However, you need to dig further into your debt picture and list the following:

List your current debt balance
List the current debt interest rates

Here’s an example:

Debt Type Debt Balance Debt Interest

Credit Card 1

$5,000

29%

Credit Card 2

$2,000

24%

Home Equity Line of Credit

$50,000

10%

Yes, I know it’s uncomfortable to see the raw data as to how much debt you owe, but that’s the only way you can create a game plan to get out of debt, starting today.

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

2. Track Your Expenses

Guys and gals – if you want to know the very first step to getting out of debt – it’s about understanding how much debt you have.

And to know how much debt you have, you first need to understand the following:

How much you earn
How much you spend

It’s really that simple.

You can’t go through life ignoring the numbers – and trust me, coming from a person who is not particularly fond of math, I know that numbers can be daunting.

To become financially successful, become your household’s CFO.

That was probably the best financial advice I ever received (from my multi-millionaire mentor), and it’s time for me to pass this advice on to you.

How do you become the household CFO?

By understanding your income and your expenses… in other words, become familiar with your budget!

If you’re not entirely familiar with some of the budgeting basics, let me illustrate some basic rules for you:

Type of Expense What it Means Rule of Thumb

Monthly housing debt

How much you should be spending on your monthly housing bills, including:

– Taxes
– Interest
– Principal
– HOA fees (if any)
– Home owner’s insurance

< 28% gross monthly income

Total consumer debt

Any debt that is a short-term loan (can be repaid within 1 year). This includes:

– Credit cards
– Lines of credit
– Cash advances

< 20% of net monthly income

Total monthly debt

Any debt payments – both long-term and short-term.

< 36% of gross monthly income

As I said, these are budgeting rules of thumb, so take these numbers with a grain of salt.

However, if you find yourself grossly overspending on credit card debt, for example, you’ll know that you will need to make a life change so you can find financial freedom.

Now, if you’re like me – you’ll probably want an app that is:

Efficient
Low cost
User friendly
Helps you save money
Points out where you’re overspending

I can’t operate without having a visual effect, so that’s why I would recommend checking out You Need A Budget.

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

3. Create a Needs, Wants & Wishes List

Next, it’s time to figure out what I like to call your needs, wants, and wishes list.

Name What it Means

Needs

Basic living expenses – you must spend this money to survive:

– Rent
– Food
– Utilities

Wants

Expenses that you want to spend, but don’t necessarily need to spend:

– Eating out
– Electronic gadgets
– Going out to the movies

Wishes

Expenses that you would like to spend, but that typically cost a lot and you don’t need to survive:

– Vacations
– New homes
– New (not used) cars

Figure out which of your expenses fall under the needs vs. wants vs. wishes category… and cut out any expense that doesn’t fall under the needs category.

Is that a bit extreme?

Absolutely – but if you are drowning in debt, then you have to take some rather extreme measures to climb out of that hole.

All of the money that you save by cutting out your…

Wants
Wishes

…Should now be redirected toward your debt – and I have the perfect 2 methods below (strategies 6 and 7) that could help you slash that debt in a fast and efficient manner.

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

4. Understand Your Long Term Goals

When you understand your “why,” you’ll see that your actions align with your goals.

Here’s an exercise I want you to do:

Think about your short term goals – within the next 6 to 12 months
Think about your mid term goals – within the next 1 year to 5 years
Think about your long term goals – within the next 5 years and up

When I do this exercise myself, I find that I dig deep into figuring out what I want (and what my husband wants), which ignites our motivation so much more.

And that’s the key: Find the spark that ignites your inspiration and motivation.

Below are my motivations:

Living a life free from the 9 to 5
Never disappointing my family
Never worrying about paying bills
Having the time to do the things I want

You can’t get out of debt without a crystal clear reason.

That’s why it’s so important to understand your long term goals first, before you start acting.

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

5. Increase Your Income

Think back to the beginning of this article, where I talked about 3 simple rules to get out of debt and stay out of debt:

Increase your salary
Decrease your spending
Combination of the two

Let’s talk about ways you can increase your income.

And no, I don’t mean simply wait for your employer to give you a raise…

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

Image: The Millennial Money Woman | Source: Investopedia

You’ll be waiting a long time for your salary to increase to the level you need to pay off your debt.

Instead, consider increasing your income through… you guessed it, a side hustle or through passive income!

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

6. Use the Avalanche Method

One of my favorite ways to get out of credit card debt is by using what is known as the avalanche method.

Take the illustration below, sorting the debt based on interest rate, as an example.

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

Here, you have different levels of debt, all with different interest rates.

You make minimum payments to all debts except the high-interest rate debt, where you make the most payments in an effort to eliminate the debt as fast as possible (meaning more money in your pocket).

Why do we start by paying off the highest interest first?

The higher the interest, the more money out of your pocket.

If you eliminate the highest interest payment first, you effectively “save” money on interest (as with our example, above).

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

7. Use the Snowball Method

The snowball method is similar to the Avalanche Method, except with 1 key difference:

You list the debt balance from least to greatest

Take a look at the illustration below, which looks similar to the Avalanche illustration except it’s sorted based on debt balance, not debt interest rate.

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

Note how you make the most payments toward your smallest balance debt first.

Once the smallest debt is eliminated, you make payments toward the next highest debt.

The reason why the snowball method may work more effectively than the avalanche method is because you may see more (and faster) successes with the snowball method, which can be very motivating.

If you see more success in a shorter amount of time, your behavior is reinforced.

This, in turn, means you’re more likely to practice these habits to see more success.

Below, I’ve created an illustration to show you the pros and cons of the snowball vs. the avalanche method:

Snowball Method Avalanche Method

Extra payments are made on

Smallest loan

Highest interest rate loan

Minimum payments are made on

Each debt monthly (excluding highest interest rate)

When the first debt is paid off…

Pay off the next highest loan balance

Pay off the next highest interest rate

Easiest to stay on track

Yes

Saves the most money

Yes

Takes the shortest time?

Typically, yes

Often, no

With the avalanche method, although mathematically, it would save you more money, it might be more difficult to practice in real life, since it may take longer for you to see success.

It’s up to you to decide which debt payment strategy will help you accomplish your goals.

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

8. 0% Interest (or APR) Balance Transfer

The 0% interest balance transfer technique is a dirty little secret of mine – and I’ve recommended this trick to a few of my young professional mentees as well.

Let’s start by reviewing the definition of a 0% interest balance transfer.

In other words, you will not pay interest on the balance you just transferred for the 6 to 12 month promotional period, before you do have to pay interest again on your balance.

Let’s check out the pros and cons of a 0% balance transfer:

Pros Cons

Take advantage of the 0% interest rate

May have higher interest rates after the 0% “promotional period” is up

Move your existing debt balance to a credit card with potentially better terms

There could be a balance transfer fee

Type of credit card consolidation method

You run the risk of racking up more debt instead of paying off your existing debt

Here’s when the 0% APR balance transfer will work:

You are committed to paying off your debt during that 0% APR period

Please do not be like one of my colleagues I knew:

She had $25,000 of credit card debt
She transferred her $25,000 to a new, 0% APR credit card
Instead of chipping away at her balance during the 0% period, she racked up another $5,000 of credit card debt – and ended up having to pay interest on $30,000 of total debt!

If you’re the type of person who doesn’t commit to paying off debt, then this strategy to get out of debt will not work in your favor – because you run the risk of adding more debt to your existing debt.

If that’s the case, I’d suggest considering strategy No. 9 (consolidating your debt).

Debt Payoff Strategies: Proven Methods to Eliminate High-Interest Debt

9. Consider Consolidating your Debt

The last point to get out of debt is to consider consolidating your debt.

Let’s check out the pros and cons of debt consolidation:

Pros Cons

Repay your debt sooner

Will not eliminate your financial problems – that’s up to you

Could pay less interest overall – since consolidation plans are fixed schedules (unlike with credit cards, where there is no repayment deadline)

– Loan origination fees
– Balance transfer fees
– Closing costs
– Annual fees

Typically, these costs are rolled into your overall debt, so you’ll pay these along with your monthly debt repayments.

Simplify your finances

Initially may lower your credit score (due to hard credit inquiry to set up the consolidation)

Have a fixed repayment schedule

You may have to pay a higher interest rate, depending on your credit score

In the long run, consolidating could improve your credit score – especially if your payment history is consistent

In the long run, consolidating could improve your credit score – especially if your payment history is consistent.

Consolidating could be a good idea if you:

Are committed to paying off your debt and not racking up new debt
Have a good credit score, meaning you can likely qualify for a lower interest rate
Have too many debt bills and want to simplify your monthly budget (aka pay your bills to just 1 place)

Tally is an app that I would recommend if you are looking to:

Make payments on time
Save money in the long run
Make your payments easier
Find help managing your debt
Reduce your overall credit card debt

To qualify for Tally, you must have a minimum FICO score of 660. I should mention that Tally is not available in all states.

Below is a list of states in America that would qualify for Tally:

Arkansas
California
Colorado
Connecticut
Florida
Illinois
Louisiana
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Texas
Utah
Washington
Wisconsin
Washington D.C.

If you’re interested in exploring other types of debt consolidation loans, then I might also suggest for you to check out Upgrade 👇

With a personal loan through Upgrade you get a fixed rate and term with a clear pay-off date.

This can translate into savings while eliminating the surprises of a high-interest rates that can change any time.

Funds are sent directly to the account that you choose within a day of approval.

FAQs

How do I get out of debt with no money?

The first strategy I would consider to get out of debt with no money, assuming your credit score is in relatively good shape, is to use a 0% balance transfer credit card.

You won’t have to pay interest on your debt for a certain period of time (typically between 6 months to 12 months), which is when you have to commit to paying off your debt as much as possible.

The risk you run when you transfer your debt balance to a new credit card with a 0% APR promotional period is racking up additional debt.

How can I pay off debt if I’m broke?

To pay off your debt when you’re broke, start by creating a budget, increasing your income, making payments on time, figuring out your long-term goals, cutting out all unnecessary expenses, and staying consistent with your payments.

What is the easiest way to get out of debt?

The easiest way to get out of debt is to pay more than the minimum required payment. If you review your budget and expenses, stop spending money on things that you don’t need. That money should be used toward paying off your debt.