Want to pay off your debt fast? Try reworking your budget, trimming unnecessary expenses and boosting your income to free up more cash to put toward what you owe.
Here are smart tips to pay off debt fast.
1. Figure out your budget
Getting a handle on your income and expenses can you help you figure out if you have any extra money to pay down your debt. Paying more than the minimum each month can speed up your payoff timeline.
While you’re focusing on debt payoff, work to build an emergency fund. Even a small one can prevent you from getting deeper into debt if an unexpected expense comes up.
Use this calculator to figure out your budget.
2. Reduce your spending
Every dollar counts, really. Cutting down expenses, such as Netflix, eating out for lunch or ditching an expensive phone, can add up fast.
Consider what would you give up to be debt-free?
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3. Stop using your credit cards
Halting your debt from growing any larger can make it easier to manage. One way is to stop using your credit cards.
Not adding onto the balance while you’re paying down debt can also help improve your credit utilization — or the ratio of your debt balance to your available credit — which is a major factor in calculating your credit score. The lower your credit utilization, the better it reflects on your credit score.
4. Get a side hustle to increase your income
Scraping together extra income can increase how much you can put toward your debt, accelerating your payoff.
Look into legitimate side hustles, including selling old electronics and getting a second job. Some jobs can be completed in less than an hour, like user testing for websites and apps. Others, like freelancing, will take longer, but may earn you more cash.
5. Pay off the debt with highest interest first
The debt avalanche method, where you pay debts with the highest interest rates first, can save you time and money.
Once you paid off one credit card or bill, you can roll that payment into your next debt obligation.
6. Look into debt consolidation
Rolling multiple debts into one payment — ideally with a lower interest rate — through debt consolidation can make your debt easier to manage and less expensive overall. You’ll likely need good credit to qualify.
A 0% interest, balance transfer credit card or a debt consolidation loan are two solid options for debt consolidation. The less you have to pay in interest, the higher the portion of your payment that can go to reducing the underlying debt.
7. Know when to call it quits
Sometimes debt can be too much. Debt loads greater than 50% of your annual income can take years to pay off and get in the way of other financial goals, like saving for retirement or a down payment on a house.
How to pay off debt fast: summary
- Figure out your budget
- Reduce your spending
- Stop using your credit cards
- Get a side hustle to increase your income
- Pay off debt with the highest interest first
- Look into debt consolidation
- Know when to call it quits