15 Debt Management Plans for Fast Debt Relief

There are many ways to tackle debts, including debt payoff practices and tips that offer guidance on where to start, debt relief strategies and methods that offer a game plan, and debt management services and products that offer great professional resources and help. One or more of these practices, strategies, or services could be right for you and your personal financial situation. 

First, learn how the following debt management methods work so you can make a responsible decision about which repayment strategy is best for getting you out of debt.

1. Debt Snowflake Method

The debt snowflake method is a practice that involves using any extra money that comes your way toward debts.

Debt Snowflake Method Example

If you get a bonus at work or make a profit from a yard sale, you would put that extra money toward debts instead of toward something fun or a savings account. 

Debt Snowflake Method Benefits

Using the debt snowflake method is a great way to make good use of any extra money that might come your way, especially if you’re not sure what to do with extra money when you have it.

2. Lump Sum Payments

A lump sum payment is when you use a large amount of extra money to pay off a large portion of your debt all at once. It’s similar to the snowflake method but involves larger amounts of extra money like a tax refund, a large bonus, or an inheritance. 

Lump Sum Payment Example

If you receive a large tax refund this year and you have debts to repay, use this practice by putting your tax refund money toward your debt to pay off a large chunk all at once. Just be mindful to check if there are any prepayment penalties to avoid as well.

Lump Sum Payment Benefits

Using the lump sum payment strategy can be a great way to successfully pay down large chunks of debt at a time. It can also give you a great confidence boost as your debt goes down considerably.

3. The Extra Payment Method

The extra payment method is a debt strategy that involves making more payments than what is minimally required of you. 

Extra Payment Method Example

If you have a minimum monthly debt payment of $200 on the 2nd week of each month, then you would pay another $200 on the 4th week of each month as well with this method.

Extra Payment Method Benefits

The extra payment method is a great way to double your debt repayment efforts, pay down debts faster, and still spread payments out over the month.

4. The 50 30 20 Rule (20% Toward Debts)

The 50 30 20 rule is a budgeting method that recommends spending 50% of your monthly income on needs, 30% on wants, and 20% on savings or debts. If you are currently in debt, then this budget method suggests you put at least 20% of your monthly earnings toward debt repayments.

The 50 30 20 Rule Example

If you make $5,000 per month, then you’ll spend $1,000 toward debts (20% of $5,000). Likewise, if you make $4,000 a month, then you’ll put $800 toward debts (20% of $4,000), or if you make $3,000 a month, then you’ll put $600 toward debts (20% of $3,000) with the following 50 30 20 formula:

Total Monthly Income x 0.20 = 20% of Total Monthly Income for Debt Repayment

The 50 30 20 Rule Benefits

This budgeting technique offers great guidance for how much of your monthly budget should go toward important debt repayments.

5. Cash-Only Budgeting

A cash-only budget is when you avoid the use of credit cards entirely while you focus on your debt repayment journey. 

Cash-Only Budget Example

You may put a hold on your credit cards while you focus on paying off debts, or you might cancel your credit cards to remain cash-only even after your debts are repaid. 

Cash-Only Budget Benefits

A cash-only budget is a great way to control spending if you have trouble relying too much on revolving credit. The cash envelope system is another great cash budgeting method for those interested in a cash-only financial lifestyle.

6. Pay-Down Method

The pay-down method is a debt repayment strategy that involves paying down your debts one at a time. It’s similar to the snowball or avalanche methods, but your priorities for choosing which debts to pay down first may not involve the loan amount or rates.

While you focus on paying down your first priority debt first, you’ll still want to make the minimum payments required for all debts you might have. That way, you won’t default or make those debts cost you more by incurring fees and penalties from late, insufficient, or nonpayments.

Pay-Down Method Example

Maybe you have a specific debt you would like to pay down first, like a car loan so you can own your car in full.

Pay-Down Method Benefits

The pay-down method is great for anyone who has their own priorities in mind for which debts they want to tackle first. 

7. Debt Snowball Method

The debt snowball method is a debt repayment strategy that involves paying off your debts in order of smallest to largest amounts.

Debt Snowball Method Example

If you have a $100 debt, a $200 debt, and a $300 debt, then you would first focus on paying off the $100 debt completely, then move on to paying off the $200 debt next, and finally finish by paying off the $300 debt last. 

While you focus your debt repayment efforts on the smallest amounts first, you’ll still want to make the minimum payments required for all debts you might have. That way, you won’t make those debts cost you more by incurring fees and penalties from late, insufficient, or nonpayments.

Debt Snowball Method Benefits

Using the debt snowball method is a great way to quickly meet goals at the beginning of your debt repayment journey. By paying off the smaller debts first, you’ll meet your first goals faster, which can help you stay positive and stay motivated!

8. Debt Avalanche Method

The debt avalanche method is a debt repayment strategy that involves paying off your debts in order of highest interest rate to lowest interest rates.

Debt Avalanche Method Example

If you have a debt with a 10% interest rate, a second debt with a 20% interest rate, and a third debt with a 30% interest rate, then you would first focus on paying off the 30% interest debt, then the 20% interest debt, and lastly the 10% interest debt.

While you focus repayments on the debt with the highest interest first, you’ll still want to make the minimum payments required for all debts you might have. That way, you won’t make those debts cost you more by incurring fees and penalties from late, insufficient, or nonpayments.

Debt Avalanche Method Benefits

Using the debt avalanche method is a great way to minimize the total amount of interest you pay by clearing high-interest debts first.

9. The Debt Lasso Method

The debt lasso method combines debt consolidation with either the debt snowball or avalanche methods. 

Debt Lasso Method Example

If you use debt consolidation with the debt snowball method, then you would group together whatever debts you can consolidate and then focus on paying off your debts from smallest to largest amounts. 

If you use debt consolidation with the debt avalanche method, then you would group together whatever debts you can consolidate and then focus on paying off your debts from highest to lowest interest rates. 

Debt Lasso Method Benefits

The debt lasso method is a great way to combine multiple debt strategies for maximum success, especially if you can only group some debts together, but not all into one, single, lower-interest debt consolidation loan.

10. Debt Consolidation

Debt consolidation is a debt repayment product that allows borrowers to combine multiple debts into one loan with one loan payment and one interest rate.

Debt Consolidation Example

If you have a $500 debt with a 5% interest rate and a $25 monthly payment, a $1,000 debt with a 10% interest rate and a $250 monthly payment, and a $2,000 debt with a 20% interest rate and a $350 monthly payment, then a debt consolidation loan would combine these 3 loans and 3 rates into one loan with a single interest rate and a single monthly payment.

Debt Consolidation Benefits

Using a debt consolidation loan is a great way to combine multiple loan payments and interests into only one payment with one accruing interest. This can help borrowers with multiple debts save more on interest in the long term and also simplify their monthly bills to one payment instead of several. 

11. Balance Transfer

A balance transfer is when you transfer high-interest debt to a lower-interest debt product, like a credit card with a lower interest. This is similar to debt consolidation but doesn’t necessarily involve loans or multiple debts. Balance transfers often deal with credit card debts and transferring the debt you have on a high-interest card to a low-interest card.

Balance Transfer Example

If you have $500 on a credit card with a 20% interest rate, you could transfer that credit card balance to a new credit card that only has a 10% interest rate. Some credit cards also offer special deals for a period of time, like low to 0% interest for a period of time after signing up for the card. By utilizing this time period to pay off the balance you owe, you could save money on interest and get debt-free now!

Balance Transfer Benefits

Using a balance transfer could be a smart way to save money by accruing less interest on the credit you owe with a lower-interest card. 

12. Refinancing

Refinancing is when you or your credit counselor are able to negotiate with your creditors to refinance the term of a loan agreement. Refinancing can sometimes be available for debts like mortgages, student loans, or car loans. The refinancing process might involve replacing the existing loan with a new one and adjusting loan terms like the fees, rates, pay schedule, or minimum payments.

Refinancing Example

If you have an auto loan to pay for your car, you might eventually decide to refinance with your existing lender or a new lender to get a better interest rate or a more manageable payment plan.

Refinancing Benefits

Refinancing is a great option when you need to adjust the terms of an existing loan for a more favorable agreement.

13. Debt Management Plan (DMP)

A debt management plan (DMP) is a debt payment plan that your credit counseling agency negotiates with your creditors to help you more easily pay back your debts. This payment plan might lower interest or reduce payment amounts so your debt repayment plan is more manageable.

Debt Management Plan (DMP) Example

Let's say you have a $10,000 debt with a 20% interest rate and a minimum monthly payment of $500, but you’re having a hard time making that $500 payment each month. You could work with a credit counselor to negotiate a DMP that reduces your minimum monthly payment and interest rate so you can more easily pay off your debt.

Debt Management Plan (DMP) Benefits

Using a debt management plan from a credit counselor is a great resource when you need professional guidance about your personal financial situation. Credit counselors can give you professional advice and advocate with creditors on your behalf as well. 

14. Debt Settlement

A debt settlement is when you or your credit counseling agency negotiates with your creditors to reduce the overall amount of debt you owe. This payment plan works by setting up an agreement that involves lowering the overall amount you owe, often by offering a lump sum payment to pay off the reduced debts in full.

Debt Settlement Example

If you owe $1,000 and you’re having difficulty paying it off, your credit counselor may be able to negotiate with your creditor to reduce how much you owe in favor of you paying off the reduced amount in full now. 

Debt Settlement Benefits

Obtaining a debt settlement with a credit counselor is a great resource when you need professional help paying off existing debts. It can also be a great way to become debt-free through some lump sum payments now.

15. Debt Forgiveness

Debt forgiveness is when a portion or all of a debt is forgiven or canceled. This usually happens through negotiations with a credit counseling agency or a debt forgiveness program. Debt forgiveness usually requires the borrower to meet certain eligibility requirements in order to qualify. 

Debt Forgiveness Example

See if you qualify for a debt forgiveness program by researching available programs and their eligibility requirements. You may need to submit a detailed application form to apply for a debt forgiveness program.

Debt Forgiveness Benefits

Debt forgiveness is a great resource to get out of debt for those who qualify for these programs.

Which Debt Repayment Method is Right for Me?

Now that you understand the different types of debt management plans out there, it’s time to pick the plan that will work best for you. Consider sitting down with a credit counselor who can professionally assess your finances for the best advice on how to tackle debts. 

Otherwise, pick one of the debt payoff methods, debt repayment strategies, or debt management services outlined in this article to start your debt relief journey today!

Debt Payoff Methods:

• Debt Snowflake Method
• Lump Sum Payments
• The Extra Payment Method
• The 50 30 20 Rule (20% Toward Debts)
• Cash-Only Budgeting

Debt Repayment Strategies:

• Pay-Down Method
• Debt Snowball Method
• Debt Avalanche Method
• The Debt Lasso Method

Debt Management Services:

• Debt Consolidation
• Balance Transfer
• Refinancing
• Debt Management Plan (DMP)
• Debt Settlement
• Debt Forgiveness

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This content is not intended to substitute credit counseling. Consult with a qualified financial advisor who can assess your unique financial situation and provide appropriate recommendations for personalized financial guidance.