Do you feel like you’re buried in debt…with no means of escape? Or think that it’s totally normal to have debt, so why bother paying it off? Here’s the reason – because it keeps you poor, and the banks rich. If you ever want to achieve financial freedom, you have to learn how to pay off debt quickly.
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While it may be common to carry debt (such as car loans, student loans, and on credit cards), it’s costing you a LOT of extra money. Totally unnecessarily.
Consumer debt is at an all time high. Americans paid over $104 billion in credit card interest and fees alone this year. Just interest and fees! That is all profit for the banks.
No wonder they hand out credit cards like lollipops.
If you’d like to start keeping more of your money, here are 15 tricks and tips for how to pay off debt quickly.
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How To Pay Off Debt Quickly
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1. Add it up
Even if this sounds a little (or a lot) painful, you’re gonna have to come up with the sum total of your debt. You absolutely have to get the entire picture if you plan to get anywhere.
Gather all your credit card, student loan, and car loan bills, a piece of paper, a pen, and a calculator.
If you don’t have easy access to the bills, create an account on Credit Karma. It will show a list of your accounts and you can add them up from there.
Make a list of each card or loan and its balance. Also jot down the interest rate percentage. When you total them, does the amount surprise you?
The thing about interest is that it can add up very quickly. It’s kind of like taking one step forward and two steps back. That’s why we’re gonna pay that debt off as fast as possible!
2. Stop using your credit cards
It’s virtually impossible to get out of debt if you keep racking it up. Take your credit cards out of your wallet, and remove them if they’re saved on any online store accounts.
Switch to using only your debit card. Or if you really want to easily control your spending, start using cash.
It’s almost painful to hand over cash. It really makes you think before purchasing stuff. Swiping a card doesn’t have quite the same feeling of losing something.
3. Create a budget
Don’t give up yet! Creating a budget is not complicated. I promise. If it sounds like an all-constricting prison, it’s not!
A budget is just a plan for how you’ll spend your money. That way it stops disappearing on you.
If you can add and subtract, you can make a budget. It’s a simple equation of income minus expenses.
For help making your budget, check out:
- Budgeting for Beginners: A Step by Step Guide for Getting Started
- Sticking to a Budget: 10 Budgeting Tips for Beginners
4. Make a plan
Okay, you’ve added up your debt, stopped using your credit cards, and created a simple budget.
Now it’s time to make a plan for how you’ll tackle your debt. After making your budget, how much extra per month are you planning to use toward debt repayment?
Now double it! I’m kidding. But make sure that you really are putting as much as you possibly can toward it. That’s the very best way to pay off debt quickly.
On your list of credit card and loan accounts, which one bothers you the most? Is it the one with the highest interest rate? Or the pesky lowest-balance one that should have been paid off long ago?
Rank your debt accounts in the order that you want to pay them off. How to prioritize them is really up to you.
5. Try the debt snowball method
If you don’t know who Dave Ramsey is, it’s time to start right now. I completely credit The Total Money Makeover as the beam of light, hope, and knowledge that finally got my financial mind right.
Dave came up with the Debt Snowball Method so that we can all pay debt off quickly. And feel motivated and rewarded all the while.
You can read more about it here, but basically it goes like this:
- Make a list of your debts, in order of smallest debt to largest
- Except for your smallest debt, make minimum payments on all your debts
- Pay as much as you possibly can on your smallest debt, until it’s gone
- Move onto your next smallest debt, paying as much as you can on that, until it’s gone
- Rinse and repeat until you’re debt free
Because you see success so quickly, you will feel inspired to continue your debt payoff journey.
6. Pay more than the minimum payment
The only way you will get rid of your debt fast is to pay extra on the principal.
The principal is the actual amount that you borrowed. The interest is what the bank is charging for loaning it to you.
The interest is calculated on at least a monthly basis, and it is determined by the amount of the principal. So the faster you pay down the principal, the less interest you’ll pay.
Example: Let’s say you bought a $500 TV on your credit card. The $500 is the principal. The first month your interest is based on that $500. Your minimum payment might be $25.
Of that $25, maybe only $5 goes toward the principal. (Yes, than means that $20 goes to the bank, not toward your debt.) The following month, your interest will be based on $495.
But if you made a $200 payment instead of $25, $180 can go toward the principal. ($5 of the minimum payment, plus the extra $175 you paid above the minimum payment.)
Next month, your interest will be based on $320 instead of $495. That right there is a huge savings, especially compared to paying only the minimum!
Note: Make sure that the extra amount paid is put toward the principal, not toward next month’s payment.
If you send your payments in by mail, just make a note that you want the excess applied to the principal.
If you pay online, you should be able to type in the extra amount that you want to go to principal on the payment screen.
7. Change the expensive habits that got you into debt
It’s your spending habits that got you into debt in the first place. Spending more than you earn is always a recipe for debt.
The good news? You can change them!
Your habits are just a bunch of tiny choices:
- Going out to eat instead of making dinner.
- Getting a mani and pedi instead of polishing your own nails.
- Buying throwaway novels instead of getting them from the library
- Getting new clothes even though you have plenty you’ve never worn
- Putting a vacation (or anything at all) on a credit card instead of saving up for it
Take a close look at your habits, and even more importantly, what causes them. Do you spend more money when you go out with certain friends?
Or does seeing everyone’s new stuff on social media make you want to get new stuff too?
Identifying these triggers is the first step in changing your habits.
- 10 Benefits of a Social Media Detox
- 12 Habits That Just Might Change Your Life
- Twenty 30-Day Challenge Ideas to Make This Year Better
- How to Live a Happy Life: 15 Things Happy People Don’t Do
8. Earn extra money
If you truly want to pay your debt off quickly, earning more money is the answer. Assuming you put the extra money toward your debt of course.
Earning more money could come from starting a side hustle, asking for a raise, getting a second job, or getting a better job.
Related: Here are 21 Ways to Start Earning Extra Money Today
9. Pay twice a month
Instead of making only one debt payment each month, make a half (or more) payment every time you get paid.
If you get paid every other week, but you make a payment once a month, you’re making 12 payments a year. But if you make a payment with every paycheck, you’ll have made 26 half payments, which is like an extra payment (13) per year.
It decreases your principal faster, which results in you paying less interest! Plus, it can be easier to budget your paychecks when you make smaller payments more often.
10. Sell your stuff
Certainly you have some items around the house that you don’t need or want. And that are worth money.
Whether you sell on Craigslist, eBay, or in Facebook groups, there are tons of ways to make money from your stuff online.
If you have brand name clothing, you could sell in on a site like Poshmark, or at a local consignment shop.
Don’t forget the good old-fashioned garage too, though they usually aren’t quite as profitable.
11. Call your credit cards to negotiate a lower rate
If you’re in good standing with your credit card account, you can always call them and ask for a lower rate.
They know that there are a lot of other credit card options out there for you, so they may honor your request in order to keep you as a customer.
Do a little internet research to see what other cards are offering, and use that as leverage when you call.
12. Consolidate your debt
If you have a lot of different debt accounts, it may be worthwhile to consolidate it all.
Let’s say you have 5 credit cards with interest rates ranging from 14-28% (those store cards are robbery). Together they total $5000.
You could apply for a personal loan at 9% for that $5000, and save a ton of money in interest. Plus, it’ll be so much easier to keep track of one bigger payment every month than 5 little ones.
You can apply for a loan through your credit union or bank, or through a website like Lending Tree.
There are also ways to consolidate student loans. For federal loans, log in to StudentLoans.gov to get started.
Warning: Stay away from companies that charge a fee to consolidate your loans for you. Refinancing through the Department of Education is free.
13. Cut your spending
Remember that it’s not how much money you make, but how much of it you get to keep. We all waste far more money than we realize.
There are so many ways to live more frugally. Here are a few ideas:
- Cut your grocery budget
- Shop at thrift stores instead of department stores (it’s actually fun!)
- Meal plan and eat at home
- Get rid of any membership plans you don’t use or need
- Stop trying to keep up with the Joneses
- Make your own coffee and cocktails
Related helpful resources:
- How to Create a Grocery Budget You’ll Actually Stick To
- 27 Thrift Store Shopping Hacks to Try on Your Next Trip
- How to Get Started Meal Planning Today: 10 Super Easy Tricks
- 12 Things Frugal People Don’t Do
14. Consider a balance transfer
If you will be responsible and not max out another card, look into transferring your current balance to a card that offers 0%.
Many cards have an introductory offer of zero interest for a certain amount of time. You could transfer your balance to that card, and plan to pay it off before interest starts accruing.
15. Use ‘found’ money toward debt
Found money is any windfall you weren’t expecting. When you receive it, don’t think of what you can buy with it.
Think of the freedom you’ll have when your debt is paid off.
Some examples of found money include:
- A raise
- Money you get for your birthday or other gifts
- Tax returns
- Work bonuses
Are you hyped up to start paying down your debt? I hope so!
Remember that you won’t be in this debt-repayment phase forever. And the faster you can start knocking it down, the more motivated you will feel.
If you really owe a lot, it can feel like an endless road. But just start by doing one small thing. Add up what you owe. Create your budget or make your debt repayment plan.
Read (or watch on YouTube) people’s debt repayment success stories for extra inspiration. There are people who owed a lot more than you!
Now that you’ve learned these tricks and how to pay off debt quickly, don’t fall back into old habits. Make a pact with yourself that you’ll never get into debt again!
Check out these motivational resources:
P.S. Don’t forget to join the FREE 3 Day Budget Quickstart Challenge! It’ll walk you through creating a custom budget for YOUR exact situation.