How to pay off debt faster
A practical plan, with real numbers for the snowball and avalanche methods.
Key points
- $300 a month extra clears our $22,000 example in 2 years 3 months instead of 5 years 10 months.
- That saves about $4,520 in interest compared with paying minimums only.
- Avalanche (highest rate first) costs the least; snowball can be easier to stick with.
- Balance transfers and consolidation help only if you stop new borrowing.
- The National Debt Helpline (1800 007 007) is free.
When you have several debts, the order you pay them off and the interest rates you pay make a big difference to how long it takes and what it costs. Here's a practical plan, with real numbers.
Step 1: list every debt
Write down each balance, interest rate and minimum repayment. Our example:
| Debt | Balance | Rate | Minimum a month |
|---|---|---|---|
| Credit card | $6,000 | 20.99% | $150 |
| Personal loan | $12,000 | 12.50% | $320 |
| Car loan | $4,000 | 8.90% | $180 |
That's $22,000 of debt and $650 a month in minimums.
Step 2: find an extra amount each month
Even a modest extra payment changes everything. Our budget planner can help you find it. With $300 a month extra on top of the minimums:
| Plan | Debt-free in | Total interest |
|---|---|---|
| Minimum repayments only | 5 years 10 months | $8,088 |
| Snowball (smallest balance first) + $300 | 2 years 4 months | $3,936 |
| Avalanche (highest rate first) + $300 | 2 years 3 months | $3,568 |
| Consolidate into one 9.9% loan, same total payment | 2 years 2 months | $2,516 |
Step 3: choose a method
With both methods you pay the minimum on everything, put the extra on one target debt, and roll each cleared debt's repayment onto the next.
- Avalanche targets the highest interest rate first. It always costs the least: here $368 less than snowball.
- Snowball targets the smallest balance first. You clear your first debt sooner, which helps many people stay motivated.
The difference between the two is small compared with the difference between either one and minimums only. Pick the one you'll stick with.
Step 4: cut the interest rate
- Balance transfer: moving a card balance to a 0% offer for 12 to 24 months stops interest so every dollar cuts the balance. Watch the transfer fee (often 1% to 3%), the revert rate, and don't spend on the new card.
- Consolidation loan: one personal loan at a lower rate, as in the table above. It only works if you close or cut the limits on the cleared cards. Compare with the personal loan calculator.
- Ask: a phone call asking for a lower card rate sometimes works, especially if you've paid on time.
Step 5: stop new debt
- Lower card limits or close cards you've paid off.
- Be careful with buy now, pay later: from June 2025 it's regulated as credit and can show on your credit report.
- Build a small emergency fund (even $1,000) so a surprise bill doesn't go on the card.
If you're struggling
Call the National Debt Helpline on 1800 007 007 for free, confidential financial counselling. You also have the right to ask any lender for a hardship arrangement, such as lower repayments for a while, if you can't keep up. Be wary of businesses that charge fees to "fix" debt or credit reports.
Frequently asked questions
What is the fastest way to pay off debt?
Pay more than the minimums, target the highest-rate debt first (the avalanche method), and lower your interest rates through a balance transfer or consolidation loan if you can avoid new debt.
Is the snowball method worth it?
It costs a little more interest than the avalanche method ($368 more in our example), but clearing small debts first keeps many people motivated. Either is far better than paying only the minimums.
Should I consolidate my debts?
It can help if the new loan has a lower rate and you don't run the old cards back up. Check fees and avoid stretching the term so long that you pay more interest overall.
Where can I get free help with debt?
The National Debt Helpline (1800 007 007) offers free financial counselling. You can also ask your lenders for hardship assistance.
Sources
More guides
Last reviewed October 2026. This guide is general information only. It isn't financial, tax, credit or legal advice and doesn't consider your circumstances. Rules change, so check the official sources below or speak to a licensed professional before you make a decision.