Pay down your debts

Pay down debts with these tips

How to pay down your debts & improve your financial health

Debt isn’t a bad thing in and of itself. In fact, some debt can be good. For most people these days, buying a home, getting an education or even starting a business require carrying some debt. It’s only when debt gets out of control or is costing you too much money that it actually becomes a bad thing.

“Reaching the point where you are taking on debt to pay for necessary bills and items, but without the means to pay that debt off each month, is a clear sign of trouble.”

How debt can quickly go south

“Reaching the point where you are taking on debt to pay for necessary bills and items, but without the means to pay that debt off each month, is a clear sign of trouble,” said Michael Bovee, a debt relief expert and co-founder of Resolve. “Once this starts to carry over month to month, I see the problems compound. And few of us stop to think about the fact that the price tag on the things we buy are no longer what was listed, but carry far greater costs. Life can suddenly become more expensive.”

The good news: Except for the most dire financial situations (such as the need to file bankruptcy), it’s possible to fix your debt situation fairly quickly. And in many cases, bankruptcy can be avoided through other debt relief options.

If you have a lot of credit card debt that you’re carrying from month to month, that’s not good debt. It’s costing you money every month that you carry forward that balance — perhaps hundreds or even thousands of dollars every year that you could be using to increase your retirement savings, pay down your mortgage or auto payment more quickly or take a much-needed vacation.

On top of that, if you’re at or near your credit limits, it’s negatively affecting your credit scores, which can have consequences on everything from qualifying for a mortgage loan to being chosen for a job you really want.

Ready to pay down your debt? Here’s how.

If you’re ready to end your cycle of debt, there are some tried-and-true methods for paying down debt quickly and (mostly) painlessly. (Example: check out how this guy got rid of his student loans.) It almost always requires creating and sticking to a pretty tight budget until you’ve paid off your debt. (Another example: see how this family managed to pay off $47K in debt in just one year.) Let’s take a look at a few of the methods you can use:

The debt snowball method

This method was created by personal finance expert Dave Ramsey and is called the snowball method because it starts small and gradually grows larger. You start off by making minimum payments on all but your smallest debt balance. On that one, you pay as much as you can each month until you pay it off. Then you move to the next smallest balance, and so on. You continue doing this until each of your debts are paid off. If you’re the kind of person who needs to see results to spur you forward, this is a great approach.

The debt avalanche method

Also created by Ramsey, the debt avalanche is the flip side of the snowball method. With the avalanche, you start off by paying as much as you can toward your highest interest debt. So, for example, if you have a credit card balance of $5,000 that’s charging you 24.99% APR each month, you’d start paying that debt down before you tackle your credit card that has a $10,000 balance at just 17.99% APR. Just like the snowball method, you pay off one debt then work your way to the next. The benefit of this approach is that it saves you money over time by reducing the amount of interest you end up paying. If you don’t need the motivation of seeing your debts paid off more quickly, this approach will likely end up saving you more money.

How to get started

First and foremost, you’ll need a budget if you want to pay down your debt. You need to know exactly how much money you have coming in every month and exactly where you’re spending it. If you’re not a fan of spreadsheets, there are plenty of apps that can help you setup (and stick to) your budget. You can learn more about these apps and how to create a budget here.

There are also apps that can help you sort your debt balances and figure out how much to allot to each as you pay off your debt. Two of our favorites are Tally and EarnUp.

About Tally

Tally is a free app that describes itself as “a robo-advisor for credit card debt.” The Tally app helps you monitor things like your balances, interest rates and due dates and gives you a personalized plan for paying off your credit card debt.

About EarnUp

Similar to Tally, EarnUp lets you manage all your debt accounts — not just credit cards — in one place. That includes mortgages, student loans, auto loans and even personal loans. But unlike Tally, Earnup takes small withdrawals from your bank account on the days you get paid and applies those amounts to your debts for you.


“I like Tally and EarnUp because they take all of a customer’s debts into one place and make progress easy to track,” Resolve’s co-founder Bovee says. “All the while, they are making calculated payments for their users and taking away the fear of late payments. They take the thought and complicated math out of it for the consumer, which can be some of the biggest frustrations for those struggling to get in control of their debt.”

Helpful tools

Assess your debt calculator — Helps you answer the question, “Do I have too much debt?”

Debt settlement agreement — Build the contract for your settlement documenting the criteria you negotiate with your creditor.

Debt consolidation calculator — Assess if debt consolidation is a viable option for you.

Credit card payment calculator — Discover how long it will take to pay off your current credit card balance.