How to pay down debt quickly in 5 simple steps | Earnest

How to pay down debt quickly in 5 simple steps

By Ted Vrountas | Published on March 10, 2026

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Hannah Olinger spent her 20s digging herself into debt. At the time, she thought it was a normal life for a 20-something: credit card debt, a monthly car payment, and student loans. She didn’t pay much attention to her spending until she sat down with all her loan documents one day—and realized she owed nearly$54,000. If she kept making only the minimum payments, it would take her more than 20 years to pay it all off.

Hannah wanted to act fast. So, she sat down, made a plan, and got to work. Just 3 years later, she paid it all off. Here are some of the strategies that worked for her, plus additional tips to help you in your own journey to debt freedom.

Key takeaways

1. Organize and assess your debts

For Hannah, the first step to paying off debt was getting organized. Start by making a list of all of your outstanding debts—including student loans, credit cards, personal loans, auto loans, and any other debt. For each debt, write down:

Now assess your debts. Figure out which accounts are costing you the most each month. Also identify the balance you think you can pay off fastest.

These numbers may feel overwhelming at first, but don’t get discouraged. With a solid repayment plan, patience, and discipline, you can pay it all off. Consider some of the following strategies to help you get started.

2. Choose a debt repayment strategy

The two most popular debt repayment strategies are the snowball method and the avalanche method. Both are effective for addressing consumer debt—like credit cards, auto loans, payday loans, and personal loans—as well as student loan debt. The snowball method focuses on paying off debt in order of principal balance, while the avalanche method focuses on paying off accounts in order of interest rate.

Both methods require you to pay the minimum payments due on all your debts except for one, which you’ll put all your discretionary income toward until it’s paid off. Then, you move on to the next debt and repeat the process. Here are the differences between the two strategies and why you might want to choose one over the other.

The debt snowball method

Once Hannah organized all her debts, she realized the debt snowball method would be the most effective option for her. This strategy involves paying your debts in order from the smallest balance to the largest, with the intention of quickly eliminating the smaller debts and building momentum to help you pay off larger ones.

This process can be extremely effective for people who struggle to stay motivated to stick to their debt payoff plan. Since the snowball method has you knocking out debts and hitting milestones at a faster clip, it can help you visualize your progress and build confidence.

The downside of this debt reduction strategy is that it doesn’t take interest rate into consideration. While you’ll feel like you’re making progress psychologically, this approach may not be the most effective financially, since you could end up saving your highest-interest debts for last. If that happens, you’ll likely pay more money over time than if you focused on paying off your high-interest debt first.

Snowball method example

First, list your debts in ascending order of outstanding balance. Let’s say those are as follows:

Now, look at your monthly expenses. Determine how much you spend—and how much money you have left over after you’ve paid for rent, utilities, and essentials, and made all your minimum debt payments. In this case, let’s say you end each month with $200 in spare cash.

While continuing to make all your other minimum payments, put that extra $200 toward your smallest debt each month. (In this example, that’s your credit card payment.) You’ll now be paying $255 in total toward your card each month. Once it’s paid off, you’ll be left with $255 in free monthly cash, which you’ll “snowball” over to your personal loan. Now you’ll be paying $315 total on that loan each month.

Make this newly inflated payment each month until the personal loan is paid off. Next, you’ll put that free $315 toward your undergraduate loans…and so on. You’ll continue like this until all your debts are paid in full.

The debt avalanche method

The debt avalanche method is similar to the debt snowball method, except instead of paying off smaller balances first, you prioritize debt with the highest interest rate—or, better yet, annual percentage rate (APR).

This method attacks the debt that’s likely to cost you the most money in interest. It can stop a big balance from growing even bigger as interest compounds. For this reason, the debt avalanche method has the potential to save you more money over time than the debt snowball method.

That said, this method can be hard to stick to because you won’t feel the same psychological sense of success that you will with the debt snowball method. You may find yourself chipping away slowly at a debt that won’t be fully paid off for years. That can feel discouraging if you don’t keep the big picture in mind.

Not only that, but the debt avalanche method requires you to commit a consistent amount of discretionary income to a debt until it’s paid off. If you find yourself with less room in your budget to contribute to your debt, high interest rates could see that debt grow back quickly. So, while this method offers the potential for the biggest savings, it also requires the most discipline.

Avalanche method example

First list your debts in descending order of interest rate. Continuing from the above example, those debts would look like this:

As before, let’s say you have $200 in spare cash after you’ve paid for your essentials each month. Put that extra $200 toward your highest-interest debt (your credit card debt) each month until it’s paid off in full. When that’s done, you’ll throw all your free cash at the account with the next-highest interest. Do that each month until it’s paid off, then move to the next debt.

3. Make a budget

When Hannah was paying off her $54,000 in debt, she got in the habit of creating a budget spreadsheet at the start of each month. She’d list out her income and subtract all of her non-negotiable expenses—including rent, utilities, and monthly debt payments. Next, she’d allocate a certain amount of money toward groceries, gas, transportation, and other personal expenses.

At the time, debt payments ate up about 33% of Hannah’s take-home pay. Seeing this number regularly kept her motivated. And at the end of the month, looking over her expenses helped her rein in bad spending habits so she could devote even more extra cash toward repayment. Don’t have a budget yet? Here’s how to make one:

Review your statements

First assess what you’re currently spending. Go through your last few months of bank account and credit card statements, and catalog every transaction. How much do you usually spend on food, rent, utilities, nights out, coffee dates, car insurance, pets, healthcare, and so on? Add up your spending for each category and write it down.

Cut down on luxuries

Now do some analysis. Is there a place where you could spend less, even for just a short period of time, to meet your financial goals? Could you, for example, cancel a few subscription services, eat out one fewer time per month, or try thrifting instead of shopping the latest arrivals at a boutique you love?

When Hannah was paying off her debts, she chose to make a lot of changes to her daily habits. She bought a coffee maker and started making coffee at home instead of hitting the cafe every morning. She canceled her regular nail appointments, started vacationing closer to home, and learned to lean on the local library instead of buying new books. By making these small changes, she was able to save about $150 per month. That $150 went straight into paying off her debt.

Brownbag your lunch

Americans spend more than $3,000 on eating out each year. It’s convenient—but it can be hard on your budget. Try creating a meal plan based on what’s on sale at the supermarket. Pick one day per week to cook big batch meals and set aside portions for the week. Bringing your own lunch and snacks to work can save you $10 to $15 per day.

Negotiate where you can

There’s no harm in asking for a discount—and you might be surprised by what you’re offered. Here are a few expenses you might be able to negotiate.

Consider temporarily pausing other investments

While you’re focusing on paying off your debts, you may want to reduce—or pause—investing or saving. That’s especially true if you already have a fully funded emergency fund and are already contributing a minimum amount to retirement. The decision to scale back either of these goals is completely up to you. Only you can decide whether the peace of mind of a large savings account or the potential gains of investments outweigh the money you could save by paying off your debts faster.

Be kind to yourself

Debt can trigger feelings of discomfort or even embarrassment. But it’s important to try not to judge yourself during this process. Some articles and personal finance influencers make it seem like dropping $5 on a cup of coffee is a shameful waste of money, but obsessing over cash you’ve already spent isn’t going to decrease your debt.

The thing those articles and influencers are missing is that it’s important to enjoy your life now—not only when you’re debt-free. Plus, if you overdo the austerity and deprive yourself of all the things that bring you joy, you’re much less likely to stick to your debt repayment plan over the long haul. Payoff is a marathon, not a sprint. You’re more likely to backslide if you’re feeling miserable and deprived—and the resulting shopping bender is going to cost you way more at the end of the day than that $5 coffee.

Make a mistake? You’re human. Try to learn from your past actions and move forward without dwelling on them. You’re here now, moving forward in the best way you know how, and that’s what’s important.

4. Consolidate or refinance your debt

If you have high interest rates, an intractable loan servicer, or too many payments to keep track of, it may be time to reorganize your debt and get a fresh start. Here are a few of the most common ways to combine and streamline existing debt.

Consumer debt

Debt consolidation can help you lump together existing debts into a single new balance with a single monthly payment. There are two main ways to do this.

Debt consolidation loans

If you have multiple types of consumer debt—like an auto loan, a payday loan, and credit card debt, for example—you can combine them via a debt consolidation loan. A debt consolidation loan is usually a personal loan with a relatively low interest rate. (For this to work, your new rate should at least be lower than the rates on your existing loans.) You can use this new loan to pay off your individual creditors. When that’s done, you’ll be left with just the one loan to pay off over time, and potentially at a lower rate. That could save you money in interest.

Balance transfers

If you only have credit card debt, you may be able to apply for balance transfer credit card promotions. These cards let you transfer existing debts to a new card that has low or no interest for a set period of time. If you transfer multiple balances to this new card, you’ll effectively consolidate that credit card debt.

The trick is to pay off the new card within the introductory period. If you can do this, you’ll likely save on interest fees. But if you drag your feet and the introductory period ends, you’ll start accruing interest again—and could end up right back where you started. Also be sure to check for hidden costs; some credit card companies charge balance transfer fees, which can eat into your savings.

Student loan debt

There are two main avenues for reorganizing student loan debt: federal student loan consolidation and student loan refinancing1.

Federal loan consolidation

Student loan consolidation is a way to combine multiple federal student loans into one Direct Consolidation Loan through the federal government. This process will leave you with a single loan with one servicer. That means that you will have only one monthly bill instead of several bills from different lenders each month. Consolidation can be a good option if you have multiple federal student loans with different terms and/or rates.

One of the cons of consolidation is that it can’t save you money on interest, since your new loan will have an interest rate that’s a weighted average of the rates on your old loans. It may, however, help you keep better track of your bills and avoid missing payments.

Additionally, federal consolidation can make your monthly payments lower by extending your loan term. Just keep in mind that if you extend your term, it will also take longer to pay off your principal balance, which means you’re likely to pay more in interest. However, if extending your repayment term frees up cash to prioritize paying off other, higher-interest debts first, it could still save you money in the long run.

The other perk of student loan consolidation is that it can make you eligible for federal programs like student loan forgiveness and income-driven repayment (IDR). IDR is a type of repayment plan that can reduce your monthly payment to a fixed percentage of your income. That ensures it remains affordable, even as your salary changes. After 20 to 25 years on your IDR plan, you could have the rest of your debt forgiven.

Student loan refinancing

If you’re dealing with high interest rates on your student loans, refinancing may be a better option. When you refinance, a private lender pays off your old student loans. Then, you repay the new lender. This leaves you with just a single loan bill to worry about each month.

The terms of this new loan will be based on your current credit profile. So, if you’ve become more financially stable since you took out your original loans (and you meet your lender’s other eligibility requirements), you may be able to get a lower interest rate on your student debt. That could help you save2 on interest charges and even get out of debt faster.

Refinancing could save you money by:

You can refinance federal loans, private loans, or some combination of the two. Keep in mind that once you refinance a federal loan, you will lose access to the various repayment and forgiveness options offered by the federal government, like income-driven repayment and student loan forgiveness. Private lenders aren’t required to offer relief in the form of forbearance or deferment, either, though some (like Earnest) do.

5. Resist the urge to take on additional debt

One of the best ways to get out of debt is to avoid taking on any more. You’ll eliminate your balances much faster if you can avoid replenishing them as you pay them down.

If credit card debt has been a problem for you in the past, close those cards or hide them from yourself. No amount of credit card points or airline miles is worth the stress of debt (or the high cost of interest).

Instead, use a debit card or direct transfers from your checking account whenever possible. No, you won’t get some of the perks that come along with swiping that airline loyalty card. But you also may have much more money in your hands at the end of the day, and you might even find that you spend less in that process.

If you absolutely have to charge something to a card, pay the amount off immediately so it doesn’t increase your principal balance. And if you’re having trouble keeping up with your cost of living, consider taking on a side hustle, moving to a cheaper place, taking on roommates, or doing other things to make sure you’re living within your means.

See how much you could save with Earnest

Hannah used many of the strategies above to pay off more than $54,000 in debt in just 3 years. For her, creating a budget, reducing her discretionary spending, and sticking to a repayment plan were all essential to her progress.

Unfortunately, if you’re dealing with high interest rates, even the smartest repayment plan will feel sluggish. That’s where refinancing comes in. Student loan refinancing can help you knock down your high interest rates, put more toward your loans each month, and accelerate your path toward payoff. Ready to see whether refinancing is right for you? Use Earnest’s refinance calculator3 to see how much you could save in interest. Then, get a custom quote with our free rate-checker tool. It only takes minutes, and it won’t affect your credit score.