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The average American household has $132,529 in debt and pays $1,300 a year in interest on credit card debt, according to NerdWallet. So if you have more than one type of debt, although dealing with the burden may feel like a personal struggle, you're not alone.

Paying down debt can feel especially overwhelming when it's spread among many creditors. Your best strategy for lifting the load will depend on many individual variables, including the amount of the loans, budgeting discipline, credit score, kinds of debts and the loan terms.

To eliminate debt, start with budgeting discipline. Setting and sticking to a budget is key. First, track your spending for a month. See how you may be able to trim any expenses that are unfixed or unnecessary. And, what portion of those unnecessary expenses could be applied to your debt. Earmark that amount of money specifically for that purpose. With a dedicated savings account, you'll have a place to stash your cash where you won't be tempted to spend it on other things. In online banking it's easy to instantly transfer between checking and savings or draw from either account, so paying bills is a snap. Plus, when you are out of debt, you'll have a habit of saving and a place for that money to grow. Check out the Key Active SaverSM Account to learn more.

With your budget in place, you're ready to start tackling your debt. Check out these five strategies to consider for paying back different types of debt.

1. Use the Snowball Method for High-Interest Debt

Be aggressive in paying down your high-interest debts, like credit cards, while paying the minimum balance on your other debts. Once you pay off your most expensive debt, direct your focus to your second most burdensome one and repeat. It's known as the snowball method.

2. Use Refinancing for Mortgage Debt

Refinance your mortgage to lower your monthly payment if you find a rate that shaves a percentage point or two off your current one. Keep an eye on refinancing fees to ensure the new loan is worth the effort. A mortgage refinance calculator can help you with the decision.

3. Use an Income-Driven Plan for Student Loan Debt

Consider income-driven repayment plans for federal student loans you took out for yourself. They can reduce your monthly loan payments by basing them on your income and family size instead of on the amount you owe, according to the Department of Education. Making lower regular payments means you'll likely pay more interest over time with income-driven plans than you would under the 10-year basic standard repayment plan – however, they are forgiven after a certain period of time whether you have paid the complete balance or not.

4. Use a Zero-Interest Card for Credit Debt

Transfer credit card balances to a zero-interest card. It's a particularly useful strategy if you can pay off the balance before the promotional rate ends and a higher annual percentage rate (APR) takes effect. With one credit card instead of many, managing debt is much easier. One important thing to consider: You may need to pay a balance transfer fee for the opportunity, and that fee may cancel out the benefits of the move. If you take the step, it's important to review the terms to understand which APR will apply for new purchases. Shop for a card, like KeyBank’s Latitude®, that has affordable rates to help you pay off debt and manage your expenses over time.

5. Make a Budget and Stick to It

Taking stock of how you spend and on what items is important. If you don't already have a household budget, make a journal of how you spend each month. More often than not, people are surprised by how much they spend on lunches out, entertainment and other discretionary items – in contrast to the necessities. This window into your finances can help you see where you can add (or cut back) to meet your personal savings goals.

Once you have your budget in place, make sure you review the results each month. If you're budgeting with a partner, checking in regularly creates time to share how the budget is working toward goals you've agreed to. If you have kids, including them in a monthly budget review will help educate them about how to manage their own money. To keep your budget on track, include line items for each goal. For example, have a special vacation planned that you need to save for? List it on your budget and make regular contributions to the vacation kitty. If you're on track with your budget plan, that's great! If you've started to slip, it's better to catch those slips early, when they're easier to correct.

These are just some options available to reduce the weight of many types of debt, and you don't need to work through the process alone. Nonprofit credit counselors and your bank are among the many resources that can help you not only gain more control over debt, but also learn to alter your spending habits, too.


This information and recommendations contained herein is compiled from sources deemed reliable, but is not represented to be accurate or complete. In providing this information, neither KeyBank nor its affiliates are acting as your agent or is offering any tax, accounting, or legal advice.

By selecting any external link on, you will leave the KeyBank website and jump to an unaffiliated third party website that may offer a different privacy policy and level of security. The third party is responsible for website content and system availability. KeyBank does not offer, endorse, recommend, or guarantee any product or service available on that entity's website.

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