1. Snowball method

Here, you work on paying off your debt from smallest to largest. Let’s say you allocate $400 towards your debt payoff a month - first you focus on making sure all the minimum payments are met (so you don’t ding your credit), and then push the remainder towards the smallest debt.

Pros

• This method is best for people who are motivated by the small wins
• Easier at first

Cons

• Gets tougher as you shift to larger ticket debts
• Doesn’t save you the most in the long run, as it doesn’t account for interest rate

2. Avalanche Method

Here, you work on paying off your debt from highest interest to lowest interest. Let’s say you allocate $400 towards your debt payoff a month - the first step starts the same as the Snowball (making min payments), but the remainder is pushed towards the highest interest debt.

Pros

• Saves a good amount of interest, but not as much as a balance transfer or personal loan

Cons

• May be tougher to stay motivated if highest interest is also largest debt
• Doesn’t reduce your interest rate if it’s already high

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3. Balance Transfer

A balance transfer is when you are able to move your high interest debt over to a new card that has a promotional low rate (often of 0%) for 12-24 months. The trick here is you gotta pay it off before the interest kicks in, and there’s often a small fee to do the transfer - it’s worth it to save the interest.

Pros

• Saves you all the interest if you pay down aggressively!
• Many balance transfer cards offer a way to transfer multiple cards/balances from different companies at once

Cons

• The interest kicks back in if you don’t pay within the promotional time frame
• May make you feel like you’re making progress when you may just be kicking the can down the road if you’re not aggressively paying it down
• Make sure the fees don’t exceed the savings!

4. Personal Loan/Debt Consolidation Loan

The big daddy - this is great if you’re willing to be disciplined, but can also put you into trouble if you keep up your credit card spending. With a personal loan, you’re able to transfer all of your debt to a single loan with a lower APR than your credit card, a fixed monthly payment and fixed term (for example $200/mo for 36 months).

Pros

• Saves a ton of interest, but often less than a balance transfer
• Helps to consolidate multiple debts under a simple, single, monthly payment

Cons

• Doesn’t stop you from using your credit card, which if you rack the debt back up puts you back to square 1 + the new personal loan
• Often charge origination fees - the APR usually includes any fees so you can compare apples to apples

5. Call Up Your Creditors

For those in really dire straits, where you can’t manage even making your minimums, a change in your payment terms may be right for you. You can either call up the creditors yourself, or go through a DMP company (debt management program) who negotiates with your creditors to set up custom payment plans  and helps you consolidate the payments into one. However DMPs often charge fees to do this (though there are some free services, like StepChange).

Pros

• Helps you get back on track and stay in good standing with your creditors
• Can sometimes lower your interest and fees

Cons

• If you go through a DMP, they often force you to close all your credit cards, meaning you can’t use them and affecting your credit in the short term. Long term, this is still better than declaring bankruptcy. Try negotiating on your own behalf first so you don’t need to touch your credit cards.
• Lenders can change their mind and rewrite the terms as these are informal agreements, whether you go through a DMP or by yourself
• Most DMP providers charge fees themselves, some do not (like StepChange).
• In some cases you may end up paying more interest if you lower the monthly payments.

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