Ranked: The Best Debt Payoff Strategies for Busy Moms

A 2022 survey by Capital One found that 73% of individuals identified their finances as a major contributor to their stress levels. If you're part of that 73%, and if the cause of your stress is debt, don't despair. Debt is a temporary situation. Here are four methods that can help you whittle your balances down to zero without demanding too much of your time. After all, you have better things to do than worry about debt.

1. Avalanche method

The debt avalanche focuses on paying off debts with the highest interest rates first. Here's how it works:

• Make a list of your debts, how much you owe, and the current interest rate on each, from highest to lowest.
• Take a look at your budget and bank account to determine how much extra you can put toward your debt each month. For the sake of this scenario, let's say you can budget for an extra $100.
• Pay bills as usual. However, when it's time to pay the debt with the highest interest rate, add the extra $100 to your payment. Let's say your "regular" payment on this debt is $150. Instead of $150, you'll make a payment of $250. The extra $100 will go directly toward the principal.
• Once that debt is paid in full, go on to the next debt on the list. Now, you'll make your regular payment to that creditor, plus the $250 that you've been paying toward the first debt.
• As soon as the second debt on the list is paid off, move on to the third. Make your regular monthly payment, plus the $250 you've been paying toward the first debt, and add the amount you were paying toward the second debt.

The avalanche method picks up steam with each debt, making it one of the best strategies in personal finance. However, if you're afraid you'll lose motivation waiting for the first debt to be paid in full, you may prefer the next method.

Tip: Remember to stay current on each of your debts, even if you're only focusing on one at a time.

2. Snowball method

Another way to tackle debt is the debt snowball method, a strategy that focuses on paying off the smallest debt first while making minimum payments on the larger debts. Once you've paid off the smallest debt, take the money you were paying toward it and apply it to your next smallest debt.

Here's an example: You have a credit card with a balance of $500, another with a balance of $700, and a third with a balance of $4,000. Make the minimum payments on all three cards, but put any extra money you have toward the card with the $500 balance. Once it's paid off, focus on the $700 debt. Only now, you have the money you were paying toward the $500 debt to add to your regular monthly payment.

Tip: A debt payoff app may help you keep track of those debts as the balances drop.

3. Debt consolidation

Debt consolidation involves taking out a single loan to pay off multiple higher-interest debts. Imagine that the average interest rate on your existing debts is 17%, but you qualify for a personal loan with an interest rate of 12%.

By taking advantage of a personal loan with a lower interest rate, you can pay off your existing debt and are only responsible for repaying the loan. Better yet, since you're paying a lower interest rate, you'll save money and will likely get rid of the debt at a faster clip.

To land a personal loan with a good interest rate, you normally need a good credit score. If your credit score has taken a hit, you may want to consider the next option.

4. Debt management plan

If you're at wit's end and your credit score is shot, a nonprofit credit organization like the National Foundation for Credit Counseling (NFCC) may be able to help. After a phone call with an NFCC Certified Counselor, you'll be armed with an actionable plan to get rid of your debt.

Typically, this plan involves debt management. With a debt management plan (DMP), an NFCC member agency negotiates with your creditors. By partnering with reputable agencies, NFCC can help consolidate debt, offer a repayment program you can afford, and negotiate payment terms with your creditors. Once agreements are in place, you make a single monthly payment to the member agency, which then uses the funds to repay your debts.

As you decide which strategy is right for you, it's important to keep in mind that a DMP can affect your credit score. It's quite possible that your credit file will indicate you're enrolled in a DMP, which in turn could make it more difficult to get credit while in the program. However, if your score is already low, you have nowhere to go but up. As long as you stay current with your DMP payments, having a DMP reported to the credit reporting agencies will look better than ongoing late or unpaid debts.

When humans feel stressed out, our brains don't function as they should, and it's possible to believe that our current situation will last forever. Nothing could be further from the truth. For debt, it's only a matter of time until you can look at it in the rearview mirror. You just need to pick a payoff strategy that works for you.