DIY debt solutions: How to get out of debt yourself

How to understand your debt before choosing a DIY solution

Before you choose a do-it-yourself debt solution, you need to understand exactly what kind of debt you’re dealing with. Not all debts are the same, and the strategy that works best depends on your situation.

Know the total amount you owe

You need to know exactly how much money you owe before starting any kind of DIY debt repayment strategy

Add up all your debts, even the small ones. 

Having the full number in front of you can be eye-opening. It can help you see how realistic it is for you to get out of debt on your own.

If you believe you can handle it on your own, then it’s time to see what kinds of debt you have.

Identify high-interest debt

High-interest-rate debt costs you more money. 

Credit cards and payday loans are notorious for their high interest rates, which add more and more debt the longer you take to pay them off.

Knowing which debts cost you the most can help you decide which ones to tackle first.

Count the number of debts you have

Do you owe most of your debt to a single source, like a credit card, or is it spread across several creditors?

If you owe money to several lenders, you’ll want a strategy that makes your repayment simpler, such as the snowball or avalanche methods or perhaps debt consolidation.

Check for secured vs. unsecured debts

Secured debts, like mortgages or car loans, are tied to assets. If you fall behind on these payments, the lender can repossess the asset.

Unsecured debts, like credit cards or personal loans, aren’t backed by collateral.

However, unsecured debts usually have high interest rates; they can grow quickly if left unpaid.

By understanding the full picture of your debt, you’ll be better prepared to choose a DIY strategy that actually helps you move forward.

DIY debt solution 1: The avalanche method

The avalanche method prioritizes paying off debts based on interest rates rather than balance amounts. You target your highest-interest debt first while maintaining minimum payments on all other debts. Financial experts widely recommend this method because it saves you the most money in interest payments over time.

How the Debt Avalanche Method Works

List all your debts and organize them by interest rate, from highest to lowest. Focus your payments on the debt with the highest interest rate while you continue making minimum payments on everything else. Once you eliminate the highest-interest debt, you move to the next highest rate, and so on.

Here's a step-by-step guide:

1. Rank all your debts by interest rates from highest to lowest 
2. Begin paying as much as possible on the debt that has the highest interest rate
3. Pay minimums on all debts to avoid penalties and damaged credit
4. Once the first debt is paid off, focus on the next one with the highest interest rate
5. Repeat the process until you eliminate all debts

When the avalanche method works best

The avalanche method works best if you have several high-interest debts and are looking for a way to save money on your debt repayment.

It especially works well if you have debts with significantly different interest rates. The greater the gap between your highest and lowest rates, the more money on interest you'll save.

The avalanche method helps you become debt-free faster while minimizing the total amount you pay.

However, if your highest interest debt is a large amount, it can take a long time to eliminate it.

DIY debt solution 2: the snowball method

The debt snowball method focuses on paying off your smallest debts first, regardless of interest rates.

This approach helps you build momentum and motivation by removing some debts quickly, giving you some quick wins.

How to use the snowball method:

1. List all your debts from smallest to largest balance 
2. Begin to pay off your smallest balance as fast as possible
3. Make minimum payments on all debts 
4. Move to the debt with the second smallest balance once the first is paid
5. Repeat the process until all debts are paid off 

When the snowball method works best

The snowball method works best if you have several smaller debts that you can eliminate quickly, giving you some quick victories. It also suits situations where the interest rates on your debts are relatively similar.

The snowball method is more about psychology than saving money. It’s meant to give you a mental boost from paying off some debts quickly. 

Many people find that starting with the snowball method to get small debts out of the way, then switching to the avalanche method works best. This way you get the quick wins and save money on interest.

DIY debt solution 3: Debt consolidation

Debt consolidation combines multiple debts into a single payment, often at a lower interest rate than that of a credit card. This saves you money on interest and simplifies your repayment schedule.

This solution simplifies your financial life by replacing several monthly payments with one single payment each month.

How debt consolidation works

Debt consolidation works as a DIY debt solution because it can save you money on interest.

You can get debt consolidation through a bank. Debt consolidation is essentially a new loan that combines multiple debts into one monthly payment.

Although debt consolidation is a loan, it doesn’t add to your overall debt. You’re simply turning multiple payments into one monthly payment instead.

A debt consolidation loan often comes with an interest rate much lower than a credit card. Instead of paying around 20% interest on multiple credit cards, you might secure a debt consolidation loan at 8-15%, potentially saving you hundreds or thousands of dollars.

When debt consolidation works best

Debt consolidation works best if you can consolidate multiple high-interest debts, into a loan with a lower interest rate. You'll save substantial money on interest charges while simplifying your payments.

You often need a decent credit score to qualify for debt consolidation, so it may not be available to everyone.

However, consolidation also only works if you address the spending habits that created your debt in the first place. You need to avoid taking on new debt you can’t repay in full and on time.

When DIY Solutions aren't enough: Seek professional debt help

Sometimes debt situations are too big for DIY approaches. If you're struggling to make minimum payments, facing collection calls, or feeling completely overwhelmed by your debt load, we can help.

Our Licensed Insolvency Trustees understand that debt problems can happen to anyone, and they approach every situation judgment-free. You'll receive compassionate, professional guidance tailored to your specific circumstances.

The first consultation is free of charge, giving you the opportunity to explore all the solutions available to you without pressure.

Don't let overwhelming debt control your life. If DIY solutions aren't working, we can help and provide you with the relief and fresh start you need.

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