Pay Off Debt Faster
Carrying high amounts of debt can be stressful and expensive. The interest charges add up, making it harder to pay off what you owe. Using the right strategies can help you pay down balances faster so you can become debt-free more quickly.
Reduce Interest Costs
The interest you pay on debt adds significantly to the total balance. Take steps to reduce how much interest you pay over time to pay off debt faster.
Consolidate Higher Interest Debt
Credit cards, payday loans, and other debt tend to have very high interest rates. Consolidating this debt with a lower fixed interest loan can reduce the interest costs. Options include:
- Balance transfer credit cards with 0% intro APR
- Debt consolidation loans or personal loans
- Home equity loans if you have sufficient equity
Be sure to comparison shop for the lowest interest rate and fees. Transferring debt to a lower rate helps more of your payment go to the principal balance.
Consider refinancing higher interest loans like auto loans, student loans, and mortgages. If you qualify for a lower rate based on improved finances and credit, this can potentially save thousands in interest expenses. Shop rates from multiple lenders when refinancing to find the best terms.
Ask Lenders for Lower Interest Rates
Contact your creditors and lenders directly and request a lower interest rate. If you have been a good customer, they may be willing to work with you, especially if the alternative is you defaulting. This works best if your financial situation has improved since getting the loan or card.
Pay Down Highest Interest Debt First
When making extra payments, put the money toward the account with the highest interest rate first. This is often credit cards. The higher interest debt costs the most, so pay that down aggressively. Once that’s paid off, move to the debt with the next highest rate.
Increase Your Monthly Payments
Paying more than the minimum due each month can shave months or years off your payoff timeline. Come up with ways to free up money in your budget for additional payments.
Pay Half the Balance Monthly
For credit cards, try to pay at least half the balance owed each month if the minimum is less. This prevents interest from accruing on as much of the balance and pays the debt down faster.
Pay One Extra Payment Yearly
Make one extra payment per year equal to one monthly payment. Doing this each year is like adding an extra monthly payment. On a 5 year loan, this can reduce the repayment term by nearly a year.
Pay Lump Sums
Use bonus money, tax refunds, inheritance, or other lump sums to make a big extra payment on debt. This takes a chunk out of the principal owed. Avoid tapping retirement savings to pay down debt faster.
Increase Your Monthly Payment
See if you can afford to permanently increase your monthly debt payments. Adding even $20-50 extra per month speeds up the repayment. On long term loans, increasing monthly payments has significant impact.
Budget to Free Up Cash
Look critically at your spending to find more money to put toward debt repayment. Small lifestyle changes add up, providing extra funds monthly.
Reduce Discretionary Spending
Cut back on optional expenses like dining out, entertainment, shopping and hobbies. Look for free or low cost activities in your area. Set a reasonable fun money budget but redirect most extra spending to debt repayment.
Find Cheaper Housing
After rent or mortgage, housing is often the biggest expense. Downsize, get a roommate or negotiate your rent. Reducing this major expense frees up a significant amount of money to pay off debt faster.
Lower Utility Bills
Reduce utility costs by adjusting the thermostat, weather proofing your home, installing energy efficient appliances and choosing a cheaper cable/internet plan. Lowering your utility bills provides more money to dedicate to debt repayment.
Cancel Unnecessary Subscriptions
Gym memberships, streaming services and subscription boxes add up. Cancel any subscriptions you don’t really use or need to cut monthly expenses. Put those savings toward extra debt payments.
Pick Up a Side Job
Bring in additional income from a part-time job, freelancing, or monetizing a hobby or skill. The extra money can significantly speed up debt repayment. Ideas include ride share driving, online tutoring, pet sitting, handyman services and more.
Adopt a Focused Lifestyle
Changing your daily habits and mindset around spending and debt helps maintain dedication to repayment.
Stick to Your Budget Diligently
Follow a written budget that allocates as much spare money as possible to extra debt payments. Temptation to overspend is constant. Stay disciplined about sticking to your budget and spending plan.
Limit Use of Credit Cards
Stop relying on credit cards for daily spending. Use cash, debit or payment apps instead to curb temptation to charge more. Limit yourself to one credit card for emergencies and pay it off monthly.
Avoid Taking on New Debt
Resist the desire to take on additional debt that slows down repayment of what you already owe. Bringing in lunch instead of eating out and looking for free entertainment saves money without needing new debt.
Track Repayment Progress
Seeing debt balances decrease month to month provides motivation to keep going. Chart your progress in a spreadsheet or use a debt tracking app. Celebrate important milestones along the journey.
Paying down debt faster takes focus, discipline, and making debt repayment a priority. But the freedom of living debt-free sooner makes the sacrifices worthwhile. Adopt these strategies to help eliminate debt quickly.