How to Pay Off Debt Fast: Tips to Get Out of Debt Quickly

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Thanks to compounding interest rates, the longer you take to pay off a debt, the more it will cost you. So how do you pay off debt fast?

The short answer is by being consistent and freeing up as much money for debt payments as possible. But what that looks like can vary. Keep reading for a few strategies that can help you work toward being debt-free.

How to pay off debt fast

Paying off debt might seem like an insurmountable task at first. But by taking a step back, being honest about your debt load and being patient, you can tackle it.

Get organized and list your debts in a spreadsheet, on paper or by using an online tool like Mint. The point is to know exactly how much debt you have before you can start to prioritize it.

From there, you need to decide which strategy to pay off the debt works best for you.

  • The debt snowball method
  • The debt avalanche method
  • The debt snowflake method
  • Cutting spending
  • Using a credit counselor

Debt snowball method

With the debt snowball method, you begin by paying the minimum amount due for each of your debts, then allocate any extra funds to the smallest balance. Once the smallest debt is paid off, you go on to pay the larger ones. This method provides momentum, hence its name. While it is a very motivational strategy, one of its drawbacks is that it ignores interest rates. If your largest debts also have the highest interest rates, the snowball method may result in paying more total interest over time.

Debt avalanche method

With the debt avalanche, you still make minimum payments on all your debts. However, with this method, you repay the most expensive debt first. In other words, list all your debts from highest APR to lowest APR. Then, by starting to pay off those with the highest interest rates, you will pay less money in the long run. On the other hand, if your debt with the highest interest rate is also the one with the highest balance, it might take you longer to pay it off.

Debt snowflake method

The debt snowflake method works best when used in conjunction with the snowball or avalanche method. This approach suggests that as soon as you save money — say you decided to forgo a manicure and saved $35 this month — you should use it to make a micropayment on your debt.

You still need to know whether that small payment is going toward your smallest balance or largest APR account, so this is most effective when you already have a plan.

Cut spending

You may be able to allocate more funds toward repaying your debt by cutting some of your expenses, even if just temporarily. Start by reviewing all your credit card and bank statements to categorize your spending. Then analyze where you might be overspending or anything that can be removed altogether. Are you still prioritizing trips to the gym? If not, maybe you could cancel the membership. Or maybe you can halt dining out for a while and forego that second daily latte.

"A penny saved is a penny earned," may be an annoying refrain, but this advice could help you access financial freedom faster.

Using a credit counselor

A credit counselor might be another route to help you understand and manage your debt. A counselor can assess your entire financial situation and help you create a customized plan to handle your money better.

Most reputable credit counselors are nonprofits and offer services in an office, online or by phone. The National Foundation for Credit Counseling says that its certified financial counselors help people determine the best options for getting relief from financial pressure, including by reviewing credit reports, advising on better ways to manage debt and developing a personalized financial plan for preventing future difficulties and achieving your goals. So a credit counselor might help you create a budget to avoid future overspending, as well as a debt paydown plan.

The NFCC says that any set-up fee or monthly fee should be "reasonable," which it describes as no more than $50 for set-up and around $25 per month. If you’re facing severe financial problems, the credit counselor should be amenable to dropping all fees.

A good credit counseling organization should be willing to give you free information about its services without asking you for specifics about your finances. If the organization won’t do that, consider finding another that will.

How to pay off debt fast if you have a low income

Paying off debt if you have a low income is obviously harder, but not impossible.

First, assess your debt load. How much do you need to pay monthly at a minimum? Then set a budget that allocates money for debt payments. It’s crucial to stay within the budget and not accumulate new debt. If you can live within your means while chipping away at debt, it will go much faster than being stuck in a constant cycle of new and revolving debt.

If it’s impossible to meet your basic standard of living and pay off debt, you may need to investigate other options.

One would be working with a debt settlement or debt relief service. For a fee, debt relief companies help you manage multiple types of debt with a single monthly payment and can sometimes negotiate down some of your debts. Many are for-profit companies, so beware of any hidden fees or deceptive practices. Additionally, ask what effects debt settlement could have on your credit report and tax return.

If you feel like none of these options work for you, it may be time to investigate filing for bankruptcy. Bankruptcy enables you to either eliminate or restructure your debt, depending on which type of bankruptcy is best suited for you.

However, bankruptcies are not free and typically have a negative effect on your credit score. Speak with a certified credit counselor about bankruptcy and its consequences if you think it’s an option for you.

How to pay off debt fast calculator

You can calculate how fast it will take you to pay off your debt by taking an overall look at your debt load: look at all the different types of debts you have and the different repayment periods, balances and interests. While this alone may seem like a very tedious and complicated task, there are free tools out there that can help you plan, including free debt payoff planners and credit card payoff calculators. These resources will make a recommendation for your monthly payment. You can then decide what is feasible for you to pay. Increasing your payments means you will pay off the debt faster.

Should you pay off debt fast?

Paying off your debt has several advantages, including alleviating your stress levels, helping your credit score and enabling you to be able to borrow large sums in the future.The more quickly you pay off debt, generally the less you will accumulate in interest. That means you will pay less in total.

However, you don’t want to pay off debt so aggressively that you neglect your savings account. You want to be prepared for unexpected events, such as losing your job or having a medical emergency. This is why having an Should You Save Money in Your Emergency Fund or Pay Off Debt First? is a very good idea.

The most common and well-known way to build an emergency fund is the 50/20/30 rule. Under this rule, individuals allocate 50% of their paycheck to essential needs, 20% toward savings and debts and 30% toward discretionary spending.

While you might be prioritizing the debt payments, allocating at least a small amount of that 20% toward savings means you won’t have to borrow as much in case of an emergency. This will benefit your financial stability in the long run.

Justin is a Sr. Research Analyst at ValuePenguin, focusing on small business lending. He was a corporate strategy associate at IBM.