How to Get Out of Debt: A 7-Step Plan, With the Real Cost of Avalanche vs Snowball

Figuring out how to get out of debt is a math problem with a motivation problem stacked on top.

The math is rough right now. The Federal Reserve's consumer credit release put the average rate on credit card accounts that were charged interest at 22.15% in the second quarter of 2026. At the same point, Americans owed $1.26 trillion on their cards, according to the New York Fed's Q2 2026 household debt report. At 22.15%, a $5,000 balance costs about $1,100 a year in interest before you've repaid a dollar of what you borrowed.

The motivation problem is that paying off debt takes months or years, and most plans die in the boring middle. So this guide covers both halves:

• How to list your debts so you know exactly what you're up against
• How to stop the balances growing while you pay them down
• Why a small cash buffer comes before extra payments
• Avalanche vs snowball, with a worked example that shows the real dollar difference
• Three ways to cut your interest rate, and the fees hiding in each
• When to get outside help, and which kinds of "help" to stay away from

You don't need a big salary for any of this. You need an honest list and the patience to make the same payment every month, even the months when it feels pointless.

The 7-step plan to get out of debt

Step 1. List every debt you owe

Write every debt down in one place. Credit cards, store cards, buy-now-pay-later plans, car loans, personal loans, student loans, medical bills, money you owe family. For each one, note:

• The current balance
• The interest rate (APR)
• The minimum monthly payment
• The due date

The APR is on your statement or in your online account. Every plan for how to get out of debt starts with this list.

A lot of people have never added their debts up, because seeing one big number feels worse than five small ones. Do it anyway. Every decision after this one depends on these numbers.

Here's the list we'll use as a running example. Priya is 27, earns about $52,000 and owes $20,500 across four accounts:

Debt	Balance	APR	Minimum payment
Old college credit card	$1,100	19.99%	$30
Personal loan	$3,000	11.90%	$100
Main credit card	$7,400	27.99%	$245
Car loan	$9,000	7.50%	$280
Total	$20,500		$655

The list already tells Priya something. The main card isn't the biggest debt, but at 27.99% it racks up about $170 of interest a month. That's more than two-thirds of its minimum payment, which is why minimums barely dent it.

If you have federal student loans, check your repayment options with your servicer before you treat them like any other debt. They come with rules that cards and private loans don't.

Step 2. Stop adding new debt

Take the cards out of your daily routine. You can't drain a bathtub with the tap still running. Delete saved card numbers from shopping sites and apps, set your phone wallet to your debit card and put the physical cards somewhere annoying to reach.

Don't close the accounts, though. More on why in the "what to avoid" section.

Then find the leak. Debt usually grows for one of two reasons. Either a one-off shock hit (a car repair, a medical bill, a gap between jobs) or you spend a bit more than you earn every month.

A shock needs a cash buffer, which is Step 3. A monthly gap needs a budget.

Our beginner's guide to budgeting builds one from your real bank statements. If you carry a card balance, a zero-based budget, where every dollar gets a job before the month starts, tends to work best. It's more effort, but it shows you exactly where the extra debt payment will come from.

Step 3. Build a small cash buffer first

Save a starter emergency fund before you send extra money at debt. This feels backward. Your card charges 22% and savings pay maybe 4%, so why hold cash?

Because without a buffer, the next flat tire goes straight back on the card. You pay down $600, the car needs $600 and you're back at square one, only more discouraged. A small fund breaks that loop.

How small? Our emergency fund guide suggests a starter target of $2,000 or half a month of essential expenses, whichever is more.

Keep paying every minimum while you build it. Once you hit the target, stop and turn to the debt. The full three-to-six-month fund can wait until the high-interest balances are gone.

Keep doing one other thing. If your employer matches 401(k) contributions, put in enough to get the full match. A common formula pays 50 cents on every dollar you contribute, an instant return that paying off a card can't match. Our financial order of operations lays out the whole sequence, from the buffer and the match to the debt and beyond.

Step 4. Pick the avalanche or the snowball

Choose one payoff order and stick to it. Both methods work the same way. You pay the minimum on every debt, then put every extra dollar toward one target. When that debt is gone, its whole payment rolls onto the next target. The only difference is the order:

• The debt avalanche goes after the highest interest rate first. It's the cheapest route, because your extra money always hits the debt growing fastest.
• The debt snowball goes after the smallest balance first. It costs more in interest, but you get a paid-off account sooner, and that early win keeps a lot of people going.

There's research behind the snowball, too. Kellogg School researchers David Gal and Blakeley McShane looked at nearly 6,000 clients of a debt settlement firm. They found that the number of accounts people had closed predicted whether they finished the program better than the dollar amount they'd paid off. People who watched whole accounts disappear were more likely to finish.

Worked example: Priya's $20,500

Priya's minimums add up to $655 a month. After trimming the budget and picking up a few extra shifts, Priya commits $1,000 a month in total. That puts $345 a month on top of the minimums. Here's how each order plays out, assuming the rates stay put and no new debt gets added:

	Debt avalanche	Debt snowball
Payoff order	Main card, old card, personal loan, car loan	Old card, personal loan, main card, car loan
First debt paid off	Month 16	Month 4
Debt-free	Month 24	Month 25
Total interest paid	$3,056	$3,577

The avalanche saves Priya $521 and one month. That's real money, but it's a lot smaller than most people expect.

Meanwhile, the snowball delivers a win in month four and another in month ten. Under the avalanche, Priya waits 16 months for the first account to hit zero.

Now look at the third bar. If Priya paid only what each statement asked for, with card minimums shrinking as the balances fell, the last card wouldn't be cleared for about 20 years, and the interest bill would top $18,000.

Picking the "wrong" method costs a few hundred dollars. Not picking one costs thousands.

My take: if you know you'll stick with it, use the avalanche. If you've started and quit before, use the snowball.

A hybrid works too. Clear one tiny balance first for the quick win, then switch to highest rate first. You can test your own balances in our credit card debt calculator.

Step 5. Lower your interest rate

Cut the rate and more of every payment goes to the balance. Card rates have climbed a long way in a decade. In the second quarter of 2016, the average rate on card accounts charged interest was 13.35%. Ten years later it's 22.15%.

There are three main ways to bring your rate down.

Call your card issuer. It's free and takes ten minutes. The CFPB's guide to consolidating credit card debt notes that some creditors will lower your rate, waive fees, accept lower minimums or move your due date to line up with payday.

Ask plainly: "I'm working on paying this off. Can you lower my APR?" A record of on-time payments helps your case. The worst they can say is no.

Move the balance to a 0% transfer card. A balance transfer card lets you move high-rate debt to a card with a 0% or low introductory rate for a set number of months. There are catches:

• You'll usually pay a fee. Experian's explainer on balance transfer fees puts them at 3% to 5% of the amount you move. On Priya's $7,400 card, a 3% fee is $222. A year of interest at 27.99% on that balance would be about $2,000.
• The promo rate ends. Whatever's left jumps to the card's regular rate, so divide the balance by the number of promo months and pay at least that much.
• New purchases on the card may get no grace period. And if you're more than 60 days late on a payment, the issuer can raise the rate on everything, including the transferred balance.

The cruel part, as the CFPB points out, is that if debt has already hurt your credit score, you probably won't qualify for the low rates.

Take a debt consolidation loan. A personal loan from a bank or credit union pays off several debts and leaves you with one fixed payment. The Fed's same release put the average 24-month personal loan rate at commercial banks at 11.86% in the second quarter of 2026, a little over half the average card rate.

Your rate will depend on your credit. The risk is the loan's length. A lower payment stretched over five years can cost more in total than your current debts would. Compare total interest, not the monthly payment, and watch for teaser rates that rise later.

Step 6. Find more money every month

Every extra dollar pulls your debt-free date closer. In Priya's example, the $345 above the minimums is what turns a 20-year slog into a two-year plan. Here's where to look for yours:

• Go through three months of statements and cancel the subscriptions you forgot about
• Sell things you don't use, like old gear, furniture or a second car
• Take on overtime or freelance work for a set stretch, and ask for a raise if you're due one
• Send windfalls straight at the target debt: tax refunds, bonuses, birthday cash
• Shop around for car insurance and phone plans once a year

Then automate it. Set every minimum payment to autopay so you never miss a due date. Schedule the extra payment for the day after payday, before the money has a chance to get spent.

And when a debt hits zero, don't let its payment vanish into everyday spending. Roll it straight onto the next target. That rollover is what makes both methods speed up over time.

Step 7. Get help if the numbers don't add up

If your minimums don't fit your budget, talk to a nonprofit credit counselor. You've probably reached that point if you're putting groceries or rent on a card, missing payments or staring at a payoff date more than five years away.

The National Foundation for Credit Counseling is a network of nonprofit agencies whose certified counselors will go through your budget with you, usually for free or a small fee. If it fits your situation, they may offer a debt management plan (DMP). You make one monthly payment to the agency, it pays your creditors and the agency works with those creditors to lower rates or waive fees. NFCC says your accounts get credited with 100% of what you send.

A DMP takes a while. The FTC's guide to getting out of debt says plans often take 48 months or more, and you may need to stop applying for new credit while you're on one.

It also says a good counselor spends real time on your situation. Walk away from anyone who charges a lot upfront or promises to fix all your problems.

What to avoid when you're paying off debt

Some "solutions" make the hole deeper.

Debt settlement companies. They offer to cut what you owe by negotiating lump-sum deals. The FTC warns that these programs often tell you to stop paying your creditors while you save up. That brings late fees, penalties and credit damage, and creditors can sue.

Forgiven debt can also count as taxable income. Settlement firms aren't allowed to charge you before they settle a debt, so an upfront fee is a red flag on its own.

Payday loans. A two-week payday loan with a $15 fee for every $100 borrowed works out to an APR of 391%, according to the FTC's guide to payday and car title loans. If you can't repay on time, rolling it over adds a fresh fee while the original amount stays owed. That's almost 18 times the average card rate.

Closing your old cards. Paid one off? Leave it open, especially if it has no annual fee. Closing it cuts your total available credit, which pushes up the share you're using on your other cards.

That credit utilization ratio is one of the biggest inputs into your score. Our guide on how to improve your credit score shows how it works and how to keep it low.

Borrowing against your home. A home equity loan can carry a lower rate, but the CFPB calls using one to consolidate card debt risky. If you can't repay, you could lose your home. You'd be turning unsecured card debt into debt backed by your house.

The short version

Here's how to get out of debt, start to finish:

• List every debt with its balance, APR, minimum and due date
• Stop new borrowing, and use a budget to close any monthly gap
• Save a starter buffer of about $2,000 and keep getting any 401(k) match
• Pick the avalanche (cheapest) or the snowball (quickest wins), and roll each paid-off payment into the next debt
• Call your issuers, then compare balance transfers and consolidation loans on total cost, not monthly payment
• Find extra money and automate both your minimums and your extra payment
• Call an NFCC counselor if the numbers don't work, and skip settlement firms and payday loans

The payoff order saved Priya $521. What cleared the debt was the $1,000 that left the account every month for two years.