We’re a nation that loves debt. According to CNBC, the average American has $26,000 in debt (not including their mortgage). High-interest debt can be suffocating and prevent you from reaching your financial goals.
If you’re underwater, financial freedom feels like it will take far too long to achieve. Luckily, that does not mean it’s impossible to kill your debt.
If you want to pay off debt faster, the steps in this post will help you build a pathway to success.
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How to Pay Off Debt Faster
Debt usually results from numerous things. One of the most common causes is spending more than you earn.
Fortunately, it is possible to break the paycheck-to-paycheck cycle and kill debt. However, it does take work. Here’s how to start paying down debt and find financial freedom.
1. Get On a Budget
The first step to get out of debt fast is to start a budget. People often think that budgeting is restrictive or difficult. Neither is the case. Budgeting is essential to get back on track financially.
A budget helps you tackle debt in three ways. These include:
- Showing how much you earn
- Showing how much you spend
- Letting you see where each dollar goes
If you don’t know how to budget, there are plenty of free budgeting apps that help you simplify the process.
Using a budget also reveals how much you can pay towards your debt beyond the minimum. That is essential information to have.
2. Consolidate Your Debt
What’s the interest rate you’re paying on your debt? If it’s credit card debt, you’re likely paying too much in interest. This will hold you back if you want to get out of debt since you’ll needlessly pay thousands more in interest.
You can often cut your interest rate in half, or more, with a personal loan to consolidate your debt. The best way to do this is by comparing multiple lenders at once.
Credible is a terrific solution because they let you compare rates from multiple lenders to identify the best choice for you. They can also help you with student loans.
Another option is to transfer the balance of your debt to a 0% balance transfer card.
Click here to explore balance transfer options.
Consolidating debt is often the fastest way to pay off debt quickly. It literally pays to take a few minutes to look at your options.
3. Find a Way to Make Extra Money
A common struggle for many people who want to pay off credit card debt fast is limited income. That was a hurdle I had to face. As a new college graduate, I had little extra income. I sold plasma, delivered pizza, and sold things I wasn’t using.
All of the extra money I earned went to my debt. If you’re facing a similar situation, a side hustle is a perfect way to pay off debt.
One of the best options is to work for an on-demand delivery app like DoorDash. You can work on your own schedule and earn up to $25 per hour, inclusive of tips.
DoorDash delivers anything restaurant meals and fast food to your home or place of work.
If you commit to applying all of your earnings to your debt, it greatly increases the velocity of payoff.
4. Stop Using Your Credit Cards
If you’re looking for the best tricks to paying off credit cards, there’s one that can make all the difference. You need to stop using your credit cards.
Credit cards usually have sky-high interest rates. Continuing to use them as free money only makes the situation more difficult since your balance will continue to climb.
This strategy is difficult to implement, but it’s not impossible. There are several hacks you can try to stop using credit cards, including:
- Freeze the credit card – literally
- Take them out of your wallet and only use cash
- Cut up the card(s)
- Give them to a trusted friend or family member and ask them not to give them back
There are other options you can try as well. Find what works best and get your credit cards out of your life for now.
5. Select a Payoff Method
Paying off debt is as much psychological as it is financial. You need to find a payoff strategy that works for you. Finding the right one helps you ease stress and achieve financial freedom.
The two most popular debt payoff methods are:
- Debt snowball
- Debt avalanche
With the debt snowball method, you put all your extra money towards your smallest debt first. The idea is that paying off the smallest debt first gives you the motivation and momentum to attack larger debts. You still pay the minimum on your other debts, but you focus on killing the smaller debt.
The debt avalanche strategy entails paying more towards the debt with the highest interest rate first. The idea is this saves you money on interest and helps you pay off debt quicker.
Each method is different. Identify what works best for you, then run with it.
6. Streamline Your Spending
Attacking debt requires that you analyze your spending. This is essential when trying to get out of debt.
Evaluate all of your spending and ask yourself a few questions:
- Am I receiving value from that purchase?
- When was the last time I used that service?
- Could I save money on that service?
Depending on your answers, you could free up more cash to apply to your debt. Canceling services you no longer use or negotiating lower prices are terrific ways to get more money to pay off debt.
If doing either of these things causes you stress, Billshark is a free service that works on your behalf with vendors. When they help you save money, they keep 40 percent.
You can use those savings to pay your debt. There’s no charge if they don’t win you savings.
*Special offer: for a limited time receive $25 in bonus dollars with any bill submission to Billshark. No code needed!*
7. Ask For a Lower Rate
I used this trick to pay off my debt faster. Call your creditor and ask if they can lower your rate.
The less you pay in interest, the more that goes to the principal. This will save you money and potentially shorten the amount of time it takes to kill your debt.
If you have a good history with the creditor, they will likely work with you. They would rather receive less in interest if it means they’ll ultimately be paid in full.
8. Pay More Than the Minimum
Paying the minimum on your debt feels like you’re making meaningful progress towards paying it off. Unfortunately, that’s not the case.
For example, if you have $20,000 in credit card debt and you make the minimum payment, it will take nearly 20 years to become debt-free.
This is because most of your money is going towards interest and not the principal. Regardless of if you have credit card debt, student loans, personal loans, or any other high-interest debt, it works similarly.
Every little bit extra you can pay will save you money in interest and shorten your payoff time. Again, a company like Credible can help lower your rates so you can accelerate your additional payments.
9. Know Yourself
While this method isn’t as concrete, it may be the fastest way to pay off credit card debt. You need to know yourself and your spending triggers.
It’s important to step away from whatever tempts you to spend. This will be different for everyone. My temptation was to go to the mall and buy something when I was sad or in need of a pick-me-up.
Staying away from the mall meant my credit card debt wouldn’t increase. Your temptation will be different. It can be anything from turning off the TV, staying off the internet, or minimizing time with friends who encourage you to spend.
This doesn’t mean you avoid these situations forever. You just want to use the time away to learn how to decouple these scenarios from mindlessly spending money.
Summary
It’s easy to believe it’s impossible to become debt-free. That’s not the truth.
It is possible to pay off debt. You can even do it quickly.
The key is to start your journey with a flexible plan. That will guide your debt payoff efforts and help ensure you will be free from the shackles of debt before you know it.
What are some other ways you can think of to pay off debt faster? If you’ve paid off debt, what was the one painful thing you gave up to kill your debt?
Great tips! I agree that making your own food can save you more than you’d think. It’s easy to spend hundreds each month on restaurants, coffees, and convenience foods. I think this is one of the easiest, most immediate ways to cut spending. All great tips, though!
Thanks Kalie & completely agreed. That spending can add up quickly and it’s very simple to cut back on it.
These are great! For me, the second I started to freelance/blog to make extra money is the moment my finances really started to improve. My business has grown, but even making an extra $200-300 a month is completely doable and can seriously help to pay off debt. Plus, now I eat out less because I am busier and because working on building my own business has taught me even more about the value of money.
I love how starting a side hustle can be a great motivator to paying off debt, saving money and more.
These are all excellent ways to knock out debt, John. Couldn’t have said it better myself. Often pride is the number one obstacle to debt freedom. If we can part with some of those habits, we’d be better off because of it!
Thanks Jeff!
Great, great tips here! When we were paying off auto and student loans, we were living on a single, moderate income, so we had to do all of the above. And every little bit helped. We saved a ton of money by cooking all of our own meals and shopping smarter. We still went out to eat on occasion, but we planned ahead and made it a special treat.
Thanks Amanda! It was the same for me and we’ve carried many of the same habits forward after paying off debt as you see that spending just to spend holds little value any longer.
Great info here John! I’ve taken most of the steps you outline here. Even got rid of satellite TV, and just use the computer for news and weather. Always been a gardener, but learning more about catching sales, and canning it up! It true though, if you write it down on paper – you’ll shock yourself at what you could be saving!
Great stuff bro!!
Thanks Brad! Yep, it can be shocking to see where your money is going…paying off debt or not, it’s a valuable exercise.
My book is essentially entirely about paying off debt faster through side hustles! Definitely think it’s the way to go, though you pointed out some good things to give a try prior to starting a side hustle. There may be some low-hanging fruit out there that free up hundreds of dollars a month that can be put towards debt payments.
I think it is too. It’s crazy to see how much low- hanging fruit, not to mention side hustles, that can be out there to help pay off debt quicker.
Hi, John. I have seriously scaled back my spending, but due to where I live, I find I have to buy some things online. I recommend using a rebates site to get money back when you make online purchases from companies like amazon, alibris, and many others.
Dave Ramsey’s Financial Peace University has a great plan for getting rid of debt, saving for emergencies, and planning for retirement. I liked the “snowball”. List your debts, smallest to largest. Pay off your smallest debt, no matter the interest rate. Then take the money you were paying on that debt and add it to what you’re paying on the next one! It takes time and patience but each paid-off debt is motivation to keep going!
We’d agree with the first two, but not the last one. His views on saving for retirement are more than a bit off. That said, he has certainly helped a lot of people pay off debt.
Great post! I agree that the trick to paying down debt is to lower living expenses, budget effectively, and attempt to make more money (side hustles/etc). Even throwing $20 more per month to a credit card balance can knock off years of payments.
Exactly Bo! It’s easy to think that extra little bit of cash won’t do anything, but it certainly does.