Here Are the 5 Fastest Ways to Destroy Your Debt

Getting out of debt can be a monumental task. It’s often slow going, and that can feel frustrating when debt-heavy paychecks leave you strapped for cash.

While there’s no magic solution, there are steps you can take to pay down your debts more quickly.

Here are six ways to pay off debt faster.

1. Always pay more than the minimum

Whenever possible, pay more than the minimum payment for your debts every month, even if it’s a small amount. Minimum payments on revolving debt, like credit cards, typically chip away at only a fraction of your principal balance, allowing interest to accumulate rapidly.

Lenders often build minimum payments so that they’ll take years for you to pay off a balance. For example, suppose you have $10,000 in credit card debt with a 21% annual percentage rate. With a $289 monthly minimum payment, you’ll pay for five and a half years before being debt free. But if you can double that payment every month, you’ll pay it off in under two years and save almost $4,000 in interest.

You may have to talk with your lender to make sure extra payments are actually applied to your principal balance, and watch out for any possible prepayment penalties on installment loans like mortgages.

2. Set up a payment plan

You’ll be more successful if you throw your extra money at debts with some kind of strategy – rather than just randomly making extra payments.

A commonly recommended approach to debt payoff is often referred to as the avalanche method. It’s when you focus on paying off your highest-interest loan first, since that should be costing you the most money in interest payments. However, you can approach debt payoff in whatever way works best for you.

Some people prefer the snowball method, in which you pay off the smallest debt first because the satisfaction can be motivating.

Regardless of which method you pick, the general strategy is the same:

• Make a list of all your debts along with their balances, APRs and minimum payments. Put this information in a spreadsheet.
• Prioritize your debts either from highest interest rate to lowest or smallest balance to highest.
• Track your spending and find extra money in your budget. Put as much as you can toward the first debt on your list, making minimum minimum payments on your other debts.
• Outline how much you expect to pay every month and each payment’s due date. Explore any of the free debt payoff calculators online to draft a plan, or use a template that makes it easy to track your progress.

3. Hit high-interest debts first

Because high-interest debts are the most expensive fees, the debt avalanche paydown method offers certain borrowers the most savings in interest payments. However, every borrower’s situation is unique.

So while the avalanche method will cost you less money over the long term, some borrowers find the snowball method just as effective.

4. Plug those money leaks

You’ve got a payment plan together – now it’s time to fund it. The key is seeing where you can free up some extra cash.

Go through your budget and expenditures to see where you can cut back on discretionary expenses, such as eating out, video games and concert tickets. If you’ve already stripped your budget bare of unnecessary spending, examine your essential expenses. There’s often some waste in there too, such as grocery shopping without a list or valid coupons; heating and cooling unoccupied rooms or leaving appliances plugged into an outlet when not in use.

Finally, consider any additional money you may receive in the near future, like a work bonus. You may also be in a position to pick up a side hustle (even if just for a few months) that can go toward fighting your debt down to a more financially freeing number.

5. Find help when you need it

In certain scenarios, and if you have over $20,000 in debt, getting professional help from a debt counseling organization can be the best way to go.

Sometimes you use a new personal loan to pay all your credit card debt and then pay down the consolidated line of credit balance.

Other times, it can look like moving balances to a credit card that’s offering better terms or taking out a home equity loan.

A quality debt counseling organization might be able to help you decide.