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Getting an education, driving your new car off the lot, buying a home—it can sometimes feel like every big life step comes with a little thing called debt.

And while it’s often accumulated while making investments and purchases that can help you reach your personal and professional goals and build the future you want, it’s no secret that debt also has the potential to have negative consequences.

Though your initial purchase may bring with it an initial rush of excitement and adrenaline, eventually reality sets in: You will eventually have to pay off your debt over a period of time, perhaps with variable interest, often with an added mix of financial anxiety and chest pains.

But debt repayment doesn’t have to be so stressful—sometimes it can even be empowering. It all depends on how you think about it and how you plan ahead.

Many folks may have a combination of shorter-term debts, like credit cards, and longer-term debts, like student loans and a mortgage.

Just making all the different monthly payments can become a chore that takes hours off your life, not to mention a big chunk of your paycheck. And if you’re just making the minimum monthly payments, it might seem like you’ll be repaying your debts forever.

Choosing a debt payoff strategy can ease your mind—and maybe even your wallet. A successful debt payoff strategy is typically one that helps you feel empowered and in control of your finances, while keeping you motivated to get out of debt as soon as possible.

Ahead, we’ll take a look at some popular payoff methods, including the snowball, avalanche, and snowflake strategies. We will also explore the loan consolidation strategy.

Keep in mind that each option has its benefits and drawbacks; choosing the right strategy will ultimately come down to your specific financial situation and what will most effectively inspire you to get debt-free.

The Debt Snowball Method by Dave Ramsey

The first of these snow-themed repayment methods is called the snowball method. Popularized by financial self-help guru Dave Ramsey , the concept behind this strategy is that paying off your smallest debt first (regardless of the interest rate) will give you a feeling of accomplishment that will increase your motivation to pay off your next biggest debt and, eventually, tackle all of your existing debt.

Though this method may offer a valuable morale boost that can potentially help you feel more empowered in getting your finances back on track, this method probably won’t save you as much money as paying off your debts with higher interest rates first.

Even so, it’s worth noting that a 2016 study published in the Harvard Business Review found that people using this method paid off credit card debt faster than those using other methods, for the simple reason that it’s typically easier to stay motivated when you see progress in your pursuits.

How it works: Make a list or spreadsheet of your debts (list the debt with the smallest principal balance first) along with the minimum payment amount for each of them. While making the monthly minimum payments on all debts, the strategy has you start throwing as much extra money as you can afford to spare towards the smallest of your debts.

Once you have paid this portion of your debt off, this strategy suggests you take the minimum payment you were paying on that debt and reallocate it to the minimum payment of your next-smallest debt (there’s the snowball).

The idea is that, by paying off your smallest debt and increasing the amount you’re able to put towards your next smallest debt, you’ll be able to keep your momentum going and continue repeating the process until you are debt-free.

The Debt Avalanche Method

This next method is also known as the “ladder” or “debt-stacking” method. Unlike the snowball method, which is structured around behavior and motivation, the avalanche method is about streamlining your debt repayment so that you can save the most money on interest.

The avalanche strategy can sometimes require more discipline, and the initial results may sometimes seem a bit less tangible. Even so, keeping track of how much you are saving in interest can be a great motivator for many people dealing with debt.

How it works: Make a list of all your debts by order of interest rate, from the highest percentage to the lowest. While continuing to make all your minimum monthly payments on your existing debts, the avalanche method suggests that you also “attack” the highest interest rate loan with as many extra payments as you can.

In other words, send an avalanche of extra money towards the debt that’s costing you the most.

For extra motivation, you can use an extra payment loan calculator like this one to keep track of how much you’re saving in interest.

The Debt Snowflake Method

Taking the snow metaphor even further, the “snowflake” method can be used on its own or in conjunction with another method, such as the snowball or avalanche. The snowflake method involves finding extra income on top of your usual income to help pay down your debt faster.

Side gigs and extra work are often seen as ways to afford extra purchases or make a bit of extra cash to spend on the finer things in life. But instead of using this extra money on pleasure expenses, the snowflake strategy encourages individuals to find an additional income stream that can be dedicated specifically to paying off debts more quickly.

How it works: Scrape together extra micro-payments by any means possible: using credit card rewards cash, taking those cans of spare change to the bank, selling old textbooks or collectibles online, or even taking on a few side gigs. From there, the method suggests putting the extra cash from these projects toward extra debt payments.

Consolidating Debt Under a Single Loan

One final strategy for paying down debt is converting all your various debts into a single loan, commonly referred to as loan consolidation (no snow metaphor here).

This method has the potential to dramatically simplify your loan repayment process. Instead of multiple loans and multiple interest rates, you’d have one loan and one interest rate. And ideally, this new interest rate will be close to the average of all your interest rates combined—or maybe even lower.

How it works: Start by shopping around for the best loan consolidation or personal loan offer you can find. Once you find one and are accepted, your lender will grant you a personal loan that you can use to pay off your existing qualifying loans or debts in full. Then you’d pay back the personal loan, which is just a single monthly payment.

One potential downside to consolidating your loans is that your overall repayment period may get extended, meaning you could pay more in interest over time if you only make minimum payments on your personal loan.

This said, when you take out a personal loan, you can make sure to choose a loan term that doesn’t extend your repayment period and find an option that works for you, your debt, and your financial situation.

Remember, even if you decide to consolidate some of your debt with a personal loan, you can always use the snowflake method or other strategies on the remainder of your debt.

Whatever plan you end up choosing, making consistent extra payments on your personal loan whenever possible can help you get out of debt even faster (just watch out for prepayment penalties—that’s why it’s so key to always do your research before you sign on the dotted line).

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Guest Participation: The individuals interviewed for this article were not compensated for their participation. Their advice is educational in nature, is not individualized, and may not be applicable to your unique situation. It is not intended to serve as the primary or sole basis for your financial decisions.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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Are you one of the many people who make financial resolutions every New Year? If so, congratulations! Whether your goal is to pay off debt, increase your savings or start investing for the future, there’s no time like the present to get started.

But if you’re one of the millions of Americans with student debt , it’s hard to know where to begin. How do you find extra money after making your student loan payment each month? Should you wait until your loans are paid off to start a savings account or begin investing ASAP for retirement? How much money should you allocate to each goal?

6 Tips to Build Your Savings—Even with Student Loans

While everyone’s situation is different, there are a few rules of thumb that can be useful when you’re trying to build a solid financial foundation, no matter how much student loan debt you have. Here are six steps that could help you get started.

1. Starting Small

If you’re like many people with student loans, you might not have a lot of extra money to invest or save at the end of each month. But that doesn’t have to stop you from trying. Putting away a small but consistent amount every paycheck, or once a month, can make a big difference over time. (Even a little something is better than nothing at all).

If you feel overwhelmed, perhaps focus on one or two goals at a time and just do what you can when you can. Maybe you want to save for a car or to put a down payment on a house. Or perhaps you don’t yet have an emergency fund (see #3).

You can start out by putting whatever you can afford into a high-yield savings account each month. Online-only financial institutions, like SoFi, are often able to offer more competitive interest rates than their brick and mortar counterparts.

So, if your money is sitting in a basic checking account, you could be missing out on the extra growth an online account can offer.

If you don’t want to think about setting that money aside every month—or worry that you won’t have the discipline to stick to your plan—you can arrange automatic transfers with your financial institution.

Some financial institutions also offer programs that can take a bit of the sting out of saving by rounding up expenditures to the nearest dollar and depositing the difference into your account.

And should you get an unexpected financial windfall—a tax refund, some birthday money, or a bonus at work—putting all, or a portion of it into that savings account can give it a nice boost here and there.

2. Reducing High Interest Rate Debt

If you have multiple sources of debt, it may make sense to focus your efforts on those with the highest interest rates first.

Of course, you should always pay at least the minimum on every debt you have each month. But if you have credit card debt as well as student loan debt, you might benefit from using a debt reduction strategy to pay off your bills.

Everyone’s financial situation is different, and there’s no “right way” to tackle debt, but we think SoFi’s “Fireball” method offers a balanced approach, because it targets high-interest debt and helps keep you motivated as you knock down each bill. Here’s how it works:

1. First, you’d separate your bills into “good” and “bad” debt. “Good” debts are those that can help you build your net worth—like a mortgage, business loan, or student loans. Good debt usually comes with a lower interest rate—typically 7% or less. “Bad” debt is different, because it can inhibit your ability to save money, and with higher interest rates, it’s usually more expensive in the long run.

2. Next, you’d take those bad-debt bills and list them in order from the smallest balance to the highest. Take the No. 1 bill on that list (the one with the smallest balance), and once you’ve paid the minimum on all your other bills—you could make it your mission to funnel any extra cash toward knocking down that balance.

3. Work your way down the list until all the bad debts are paid off. Once you blaze through the list, you should have more money to put toward the next bill and the next, until you get to and through the highest balances.

4. Carrying a balance on a high-interest credit card is kind of like swimming with weights tied to your ankles—it can make your financial strategy more difficult than it needs to be. So the last step of the Fireball method is to keep those balances paid off.

If you only have student loans, you can still use the Fireball method to pay them off. For example, you might pay the minimum on your lowest-interest subsidized loans while paying down your high-interest, unsubsidized PLUS or private loans more aggressively.

It also may be worth looking into consolidating your non-educational debt with a personal loan or, if you qualify, refinancing your student loans at a lower interest rate. A lower interest rate can reduce the amount of money you spend on any debt over the life of the debt.

And if the debt seems overwhelming—if, for example, you have multiple student loans—combining them into one payment could make things more manageable. (It’s important to note, though, that if you refinance your federal loans with a private student loan, you will lose access to borrower protections, such as Public Service Loan Forgiveness and income-driven repayment plans.)

3. Giving Yourself a Cushion

A general rule of thumb is to have three to six months’ worth of living expenses saved in an emergency fund in case you’re faced with an unexpected expense or if your source of income should suddenly disappear.

This is especially crucial for student loan borrowers, since, in some cases, even one late or missed payment can have an impact on your credit score. The ultimate purpose of an emergency fund is to create a financial cushion that allow you to pay all of your bills, including payments on your student loans, for at least a few months until you’re back on your feet.

4. Considering Investing as Soon as Possible

When it comes to retirement investing, waiting can cost you money. The sooner you start investing, the more time your portfolio has the potential to grow through compound interest.

Delaying your savings means you may need to save more on a monthly basis down the line. If you wait to get started until your student loans are totally paid off, you could be missing out on a lot of precious time.

That said, you don’t want retirement investing to come at the expense of your overall financial health. For example, you may want to delay or minimize investment contributions until you’ve paid down your high-interest debt and established an emergency fund (see #2 and #3). Instead, you could plan to increase contributions when you have only low interest rate student loans left on your plate.

5. Take the (Free) Money and Run

If you’re ready to start investing even though you still have student loans, there are a lot of account options out there. You could start by checking with your employer to see if the company offers a defined contribution plan, such as a 401(k), and if there is some type of matching contribution.

Many employers will match an employee’s elective deferral contribution up to a certain dollar amount or percentage of compensation. If that’s a perk at your place of business, why not aim to make the most of that match?

If you can do more, a frequently cited target is to save 15% of your income annually. But remember, if you start saving for retirement early, even small contributions can have an impact.

If your employer doesn’t offer a defined contribution plan or you’re self-employed, there are a number of other tax-advantaged retirement accounts that can help you grow your nest egg.

If you’re opening your own retirement savings account, such as a traditional or Roth IRA, you can do so at a brokerage firm, a bank, or an online financial services company, including SoFi Invest®. To find the right account for you, do your research and talk to a financial professional if needed. (As a SoFi member, you can get one-on-one access to financial advisors on the house.)

6. Adjusting as Needed

Your financial situation may look different each year, so you may want to occasionally revisit your strategy. (Quarterly might be a solid goal for you, but if that seems like a lot, an annual review could still be helpful.) In between reviews, you may find that using a tracking app can help you stick to your plan.

With an app like SoFi Relay, you can set goals, track your spending, and monitor your savings. As part of that review, you also may want to see if your investment account still matches the asset allocation you’re comfortable with, or if it needs rebalancing.

Staying on top of the day-to-day movements in your financial life can help you make better decisions for now and the future.

The next time you think about making an impulse purchase, you might decide to apply that money to your financial strategy instead. And if, down the road, you get a new job, get married, or get pregnant, you’ll have a head start on planning for what’s next.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Sometimes, even careful planning and saving aren’t enough to prepare you for the expenses that lie ahead. Maybe fall is setting in and a chill is starting to set in the air. Perfect time for the furnace to break down. Or maybe summer is just around the corner and you realize the pool liner needs to be repaired.

These unplanned costs could be inconvenient and expensive. While you may not have experienced these exact scenarios, you may have felt the pinch in another way. When that happens, the pressure to make ends meet may be stressful. Taking on additional debt is not ideal, but if you don’t have the cash you need when an emergency strikes, there are options.

Personal loans, a sometimes underrated choice, are one way to pay for an unexpected expense or cover a big-ticket purchase. This type of loan may be taken out for lots of personal reasons. Personal loans are typically funded as one lump sum and could be used for things like consolidating credit card debt, paying medical bills, funding a big move or home remodel, paying for a wedding, or taking a dream vacation.

Broadly, there are two types of personal loans—secured and unsecured. A secured loan is backed by something of value, like a car or house, which is used as collateral. Should the borrower fail to make payments on the loan, the lender can seize the collateral. Usually, the borrower will receive calls and a debt collection letter as a warning before this happens.

An unsecured loan isn’t tied to an asset, which could make them riskier options for lenders. Because they’re not secured by an underlying asset, unsecured personal loans typically have higher interest rates than car or home equity loans, but lower rates than credit cards.

Of course, saving up an “emergency fund” for unexpected expenses is preferable to taking on debt. However, if you find yourself about to charge a massive sum on your credit card, and you know you won’t be able to pay it off within a reasonable period of time, a personal loan with no prepayment penalty could be a viable alternative.

Applying for an unsecured personal loan is typically pretty straightforward. But you’ll want to do your research, and you might want to make sure you have your financial ducks in a row to help your chances of approval and qualifying for the best possible terms and interest rate.

While everyone’s needs and financial picture are different, and this article is in no way a guarantee of qualifying for a personal loan, the application process can look very similar. So here’s what getting approved for a personal loan can look like:

Steps of the Personal Loan Application Process

The application process for a personal loan might seem more daunting than it actually is. Yes, you need to know a few things about your current financial situation (and your financial history).

But it really shouldn’t take long to get your facts straight. You might find it helpful to follow these steps when you start the process for a personal loan:

1. Figuring Out How Much You Would like to Borrow

First, you might want to make sure you’re realistically estimating the amount you’ll need. Borrowing more than you need might not be a great idea, since you’ll be paying interest on the lump sum you take out.

On the other hand, you wouldn’t want to borrow less than you need, only to end up resorting to using a credit card to make up for the difference. Be honest with yourself and your lender, and work with them to find the amount, interest rate, and term that works for you.

2. Checking Your Credit

Although different lenders can use various scoring models, you might want to pull your current credit score and assess how strong it is (generally, a FICO® Score above 740 is considered very good—and above 800 is “exceptional”—but broadly, many lenders consider a score of 670 or above to indicate solid creditworthiness). This might be one of the main factors lenders consider when considering you for a personal loan, so it’s good to know your score.

3. Getting Pre-Qualified

Many lenders these days allow you to quickly see if you pre-qualify for a loan. This process could show you how much the loan would potentially be approved for, what your repayment terms and your interest rate could possibly be.

You’ll often provide basic information such as your address, income, and Social Security number. Often, lenders may do a soft credit check at that time that doesn’t affect your credit score1.

Once you see a pre-qualified quote from a couple of different lenders, you could compare the interest rates and monthly payments you’re offered before choosing the best option for your needs.

These fees could add up quickly. Factoring them in now might help you avoid any surprises down the line. Understanding the true cost of the loan, beyond just the interest rate, might help you make a decision about which loan is the best fit for you.

4. Submitting Your Application

The final step is to apply for the loan. Each lender has their own requirements for documentation and qualifying.

For many lenders, you’ll need to submit things like a photo ID, proof of address, and proof of employment or income. At this stage, the lender will do a hard credit check, which involves collecting information from all three major credit bureaus and could affect your credit score.

Ways to Help Improve Loan Approval Chances

You likely want to be approved for the best loan terms and interest rate possible. And that probably means putting your best foot forward on your application. Here are some ideas you might want to consider when applying for a personal loan:

1. Checking Your Credit History

If your credit score is shaky, the time to take action is ideally before you apply for any loan.

As a first step, you might consider requesting your credit report , which you can do for free annually . You could check for any errors or problem areas you want to work on. If you find any issues, you might want to report them to the credit bureau.

There are steps you could take to help with any misinformation reported around late payments or delinquencies. Filing a credit dispute is one idea, but keep in mind that fixing issues on your credit report could take time. It may be a good idea to do your research and understand the process.

2. Keeping a Stable Job

Before issuing a personal loan, lenders consider factors like your employment and income. Essentially, a lender is taking a risk by letting you borrow money, so they want to be confident you have the resources to pay it back.

Lenders might also be looking at how much you make and how stable your job is. So if you plan to apply for a loan, this might not be the time to change careers. Normally, changing (improving) jobs or income at the same company is not an issue. So if it’s the right time at work, you could ask for a raise.

3.Adding a Co-Borrower

If you don’t have great credit or don’t make very much, adding a co-borrower to your loan might increase your chances of approval. They might also help you get a better interest rate and repayment terms.

A co-borrower is someone who agrees to pay the loan if you default, and will be responsible for any missed payments.

That’s because a co-borrower is someone who takes the loan out with you—their name is on the loan, and you both have an obligation to repay it. Adding a strong co-borrower may improve your chances of qualifying for the personal loan that fits your needs.

Ready to Apply for a Personal Loan?

If you’re on the hunt for the right personal loan, consider SoFi. Qualifying borrowers may be eligible for up to $100,000, depending on their needs. The application process can be completed entirely online, and you’ll have access to customer support seven days a week.

There are absolutely no fees required when you borrow a personal loan with SoFi—no prepayment penalty fees.

If you unexpectedly lose your job, you could qualify to pause your payments with SoFi’s Unemployment Protection Program for up to 12 months, though interest will continue to accrue.

SoFi could even help you in your job search with benefits like career services. To get an idea of what your rate and terms could look like, you can pre-qualify and see your rate in just a couple minutes.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.