How to pay off debt: the whole plan, from first list to last payment

To pay off debt, list every debt with its balance, rate and minimum, stop adding to the cards, find a fixed amount to pay on top of the minimums every month, and send that amount to one debt at a time until the last one is gone. The order you pick matters less than people argue: on the household worked through below, $100 a month on top saves about $2,000 of interest and nine months, and the choice between the two famous orders is worth about $200. The extra is the plan. The rest is detail.

This guide is written for the United States: the rates, the regulators and the counseling services are American. The arithmetic works anywhere. Every figure was computed with the debt engine of the Tavala app's debt payoff planner, and none of it is advice about your own debts.

The plan in seven steps

1. List every debt: balance, rate, minimum.
2. Stop adding to it.
3. Find a monthly extra you can pay every month.
4. Choose an order.
5. Pay every minimum, and the whole extra to one debt.
6. Send windfalls to the same debt.
7. Check whether a lower rate is available, and whether you need help.

Steps 1 to 5 are the plan. Steps 6 and 7 make it shorter. The sections below take them in order, on one household's debts.

Step 1: List every debt

Write down every debt you have: credit cards, store cards, a car loan, student loans, medical bills on a payment plan, buy now, pay later plans, money borrowed from family. For each one, three numbers:

• The balance: what you owe today, from the latest statement or the lender's site.
• The rate: the APR, the yearly interest rate. A card's statement shows it. A 0% plan has a rate of 0.
• The minimum: the least the lender accepts each month.

Here is the household this guide uses. The debts are illustrative but ordinary. For scale, the Federal Reserve's G.19 release of 7 October 2026 puts the average rate on credit card accounts that paid interest at 22.15% in the second quarter of 2026 (20.94% across all accounts).

Two things are worth seeing in the list before any math.

The minimums are the floor of the plan. $725 a month leaves the account whatever else happens. If that number does not fit your income, skip ahead to the section on hardship programs and counseling: the plan starts there.

Card minimums usually shrink. The issuer recalculates the minimum from the balance, so the payment falls as the balance does and the card takes years longer. Card issuers have to show on each statement how long paying only the minimum would take (CFPB, reviewed 22 January 2024). The credit card payoff calculator compares a shrinking minimum with a fixed payment for your card. The plan below fixes each minimum at today's amount and keeps paying it, which is the first decision of the whole plan: pay the same amount every month even when the minimum falls.

Step 2: Stop adding to it

A plan to pay off a card while you keep spending on it is a plan to pay a moving target. Two practical moves:

• Take the cards out of the wallet and out of the phone's saved payments. Keep the accounts open unless you have a reason to close them; closing is a separate question.
• Pay new spending from a debit card or cash. If you transfer a balance to a new card, do not use it for purchases: the CFPB warns that "if you use the same credit card to make new purchases, you won't get a grace period for those purchases" (CFPB, consolidating credit card debt, reviewed 2 September 2026).

Everything below assumes no new spending on the debts. With it, every number is optimistic.

Step 3: Find the monthly extra

The extra is a fixed amount you pay every month on top of all the minimums. It is the step most plans skip and the one that matters most.

"Fixed" matters more than "large". A plan works when the same total leaves your account every month, so pick an amount you can pay in the worst month of the year, not the best. Where it usually comes from:

• A few weeks of tracking what you spend. The extra often turns up in a few categories nobody had added up: eating out, subscriptions, delivery, the phone plan. Tracking expenses by hand is the cheapest way to see them.
• Money that was already going to debt. When a debt is paid off, its minimum is not freed for spending. It stays in the plan and joins the extra (step 5).
• Income that is not in the budget yet: overtime, a side job, things you sell.

Start with what you can do now, even $50. You can raise it later; the plan simply ends sooner.

Step 4: Choose an order

Every month, every debt gets its minimum. The question is where the extra goes. Two orders cover almost every plan:

• Avalanche: highest rate first. The extra goes to the debt with the highest APR. It costs the least interest.
• Snowball: smallest balance first. The extra goes to the smallest debt. It clears a whole debt sooner, and a debt gone is a payment gone from the list.

Which wins? Avalanche costs the same or less interest in practically every case: in 30,000 random plans we ran, snowball never cost less, and the median gap was $129 to $188 (debt snowball vs avalanche: the numbers). The gap grows large in one shape: a big balance at a high rate beside small, cheap debts, where snowball spends months on debts that cost nothing. Snowball's case is the early win, and there is evidence that closing accounts helps people stay with a plan. That data piece has the tables and the studies.

On this household the orders split in one place: the $900 medical bill at 0% is the smallest balance, so snowball pays it first, while avalanche goes after the store card at 29.99%.

If the gap on your debts is small, pick the order you will keep paying. If it is large, the interest is real money.

Step 5: Pay the plan, and see what the extra does

Here is how the plan runs each month. These are the rules of the engine behind the Tavala app's payoff planner, which the site's calculators run too:

1. Interest is added to every debt: balance x APR / 12, rounded to the cent.
2. Every debt is paid its minimum.
3. The extra, plus the minimums of every debt already paid off, goes to the priority debt. If that debt is cleared mid-month, the rest goes to the next one.

Rule 3 is the part that makes a plan finish sooner than each debt's own schedule. The monthly total never drops. When the store card is gone, its $45 does not go back to spending; it goes to the next debt in line.

Month 1, with $100 extra and avalanche, is $825 in total:

The card's interest is $5,400 x 23.99% / 12 = $107.955, rounded to $107.96. The store card gets its $45 minimum plus the $100 extra, because 29.99% is the highest rate.

Now the whole plan, at three extras:

Interest is the total over the whole plan. Read it across, then down.

Across, the method is worth about $200. At $100 extra the two orders finish in the same month; at $250 snowball takes one more. In exchange, snowball clears its first debt (the medical bill) in month 6 at $100 extra, against month 10 for avalanche's first (the store card).

Down, the extra is worth thousands. With avalanche, $100 a month saves $2,035.22 and 9 months against paying only the minimums. $250 a month saves $3,373.36 and 17 months. Snowball with $100 extra ($5,400.29) costs $1,826.09 less than avalanche with nothing extra ($7,226.38). The weaker method with an extra beats the stronger one without.

With no extra, the method barely matters. The minimums alone clear the debts in an order neither method chooses: the medical bill in month 18, the store card in month 30, the car loan in month 44. The two plans differ by $4.06.

The order the debts clear in, at $100 extra:

To run your own debts the same way, the debt payoff calculator takes each one with its balance, rate and minimum, and shows avalanche, snowball or an order of your own, month by month. It runs in your browser and sends nothing.

Step 6: Send windfalls to the same debt

A tax refund, a bonus, a gift: one-off money shortens the plan if it goes to the priority debt and nowhere else. Suppose the household gets $1,500 after month 3, on the $100 plan with avalanche. The store card has $900.12 left, so the lump clears it, and the other $599.88 goes to the main card, the next highest rate. The store card's $45 minimum rolls on to the card from month 4.

The $1,500 saves $1,046.87 of interest and 3 months. The point is not the exact number. It is that a windfall works hardest on the highest rate, and that it shortens the plan only if the monthly total stays the same afterwards.

Whether a windfall should go to debt or to an emergency fund first is a different question, and it depends on what a surprise bill would cost you. A plan that falls back on a credit card when the car needs tires has not removed the card.

Step 7: A lower rate: balance transfers and consolidation

Two products promise a lower rate on what you already owe. Both can help, and both can cost more. What decides it is the rate after any promotion, the fees, and the length of the new loan.

Balance transfer cards

A balance transfer moves card debt to a new card, often at 0% for a limited time. The CFPB's points, plainly:

• There is a fee, even at 0%. "A credit card company is permitted to charge you a balance transfer fee on a zero percent rate offer" (CFPB, balance transfer fee, reviewed 23 September 2024). The CFPB's card-shopping guide says some issuers charge "a one-time fee of 3 to 5 percent of the balance you're transferring" (CFPB, How to find the best credit card, January 2021).
• The promotion ends. "The promotional interest rate for most balance transfers lasts for a limited time," and what is left then carries the card's regular rate (CFPB).
• New purchases on that card pay interest, as in step 2.
• A payment more than 60 days late lets the issuer raise the rate on all balances (same page).

A transfer works when the balance can be cleared, or nearly, before the promotion ends. Divide the transferred balance plus the fee by the months of the promotion: that is the monthly payment the transfer asks for. If it is far above what you can pay, most of the balance meets the regular rate anyway.

Consolidation loans

A consolidation loan from a bank, credit union or other lender pays off several debts and leaves one payment. The CFPB says these loans "convert many of your debts into one loan payment," warns that a low advertised rate can be a temporary teaser rate, and that a lower monthly payment often comes from a longer term, which can raise the total cost (CFPB, consolidating credit card debt). It also says the plain thing: a loan does not fix spending more than you earn.

Here is what the term does, on this household's two cards ($6,650 together). The G.19 release puts the average 24-month personal loan at commercial banks at 11.86% in the second quarter of 2026. Your offer will depend on your credit.

At the same monthly payment, the 24-month loan saves $1,299.29 against the cards. With a 3% fee, interest and fee together come to $1,077.54, still well under the cards. Stretch the same loan to 60 months for a payment under $150 and it costs $2,197.26, $45.48 more than simply paying the cards $312.61 a month. A consolidation that lowers the payment can be a consolidation that raises the cost.

Two more cautions. Folding the cards into a loan does not close them: step 2 still applies. And the CFPB warns that some offers that look like consolidation are debt settlement companies charging fees up front.

Hardship programs and nonprofit credit counseling

If the minimums do not fit, the plan above has no extra to work with, and the first call is to the lenders.

Ask the card company. Many issuers run what the CFPB calls "loss mitigation programs, sometimes called forbearance or hardship programs": a pause, a lower payment, or a lower rate for a time. The CFPB suggests calling before or as soon as you miss a payment, and getting "written confirmation of any alternative repayment option to which you agree" (CFPB, start with your credit card company, 2019). Student loan servicers and other lenders may have options of their own; ask them.

Nonprofit credit counseling. Credit counseling organizations, in the CFPB's words, "can advise you on your money and debts, help you with a budget," and can set up a debt management plan (CFPB, what is credit counseling, reviewed 2 August 2023). Under a debt management plan "you make a single payment to the credit counseling organization each month," and it pays your creditors; counselors "do not always negotiate reductions in the amounts you owe" (CFPB, credit counseling and debt settlement, reviewed 15 May 2024). They may charge fees, so ask for a price in writing. To find one, the CFPB points to the National Foundation for Credit Counseling, a nonprofit network working since 1951 by its own account, the Financial Counseling Association of America, and the list of approved counselors kept by the U.S. Department of Justice.

Debt settlement is something else. Settlement companies, usually for-profit, try to get creditors to accept less than you owe, and often tell you to stop paying while they negotiate. Interest, late fees and damage to your credit can pile up meanwhile. The CFPB says a settlement company "could be breaking laws" if it charges a fee before it has settled a debt, and that these companies "usually can't get better terms" than you could get by negotiating yourself (same page).

A debt already in collections. Do not ignore it, and do not pay before you know it is yours. A collector generally has to tell you the creditor, the amount and how to dispute it; if they cannot, the CFPB says "it could be a scam" (CFPB, when a debt collector contacts me, reviewed 15 October 2026). Late payments and collections can stay on a credit report for years: "a credit reporting company generally can report most negative information for seven years" (CFPB, reviewed 2 September 2026).

When to get help

The plan in this guide needs one thing to work: a monthly total that covers every minimum and leaves something over. Get outside help, starting with the lender and then a nonprofit counselor, when:

• the minimums take more than you can pay without borrowing more,
• you are already late on a payment, or about to be,
• a debt is in collections or a lender has mentioned court,
• the plan's debt-free date is so far away that you have stopped believing it.

Bankruptcy is a legal question for a lawyer. A counselor can help you decide whether it is time to ask one.

Doing it in the Tavala app

The app's payoff planner (Plan › Debt payoff) runs the plan above on the debts you track. It reads each debt's Amount owed, its Monthly payment as the minimum and its Interest rate (APR, optional), including dated rate changes such as a promotion that ends. It defaults to Highest rate first, which it describes as "Highest interest rate first (avalanche) - least total interest." Smallest first is the other pill under What if, and a line says how much interest one saves over the other. The planner, the order and both strategies are free with any number of debts; the extra-payment, lump-sum and consolidation what-ifs need Tavala Plus once you have two or more. There is no custom order in the app; the site's debt payoff calculator has one.

If your list from step 1 is already in a spreadsheet, you can bring it in as a CSV of debts. See plan to pay off your debts, track a loan or a credit line and import debts from a CSV file.

What the numbers leave out

The household's minimums are fixed, one rate per debt, every payment on time, no new spending, no fees. Real card minimums shrink, promotions end, variable rates move and life sends bills. Re-run the plan when something changes: a new rate, a paid-off debt, a raise. The figures show how the pieces of a plan trade against each other, not your own payoff date.