Debt can destroy your financial dreams and personal life, constantly draining your resources for nothing in return.
Whether you carry a small balance on your credit card each month or are staring up at a mountain of financial obligations, debt makes it impossible to get ahead. It’s frustrating, and you know it would be incredibly worth fixing — but how?
Paying off debt and loans requires dedication, determination and persistence. Following are a few smart tips on how to get rid of those debts fast.
1. Stop using credit cards
If you’re thinking about how to pay off debt in the fastest time possible, start with your credit card debt. Credit cards usually carry the biggest interest rates — often 25% or more — and that can make your balance balloon out of control.
The first step is to stop using your credit cards altogether. The more you swipe, the more the balance climbs. Even if you continue to use your card, avoid leaning on perks such as the ability to take cash advances. As we explain in “10 Common and Costly Credit Missteps“:
“Unlike when you withdraw cash from your bank account via debit card, a cash advance via credit card generally costs you a steep cash-advance fee as well as a steep interest rate. In addition, interest charges start accumulating immediately, usually from the day you take out the loan.”
Having a hard time letting go? Try literally freezing the cards in a cup of ice. By the time you are able to access them again, hopefully you will have changed your mind about spending.
2. Pay as much as you can afford each month
How to pay off debt fast involves simple math. The more you pay, the faster you’ll be free of your obligations. Don’t just stick with making the minimum payment every due date, or it will take decades.
Of course, creating an emergency fund should be a top priority. But once you have accomplished this goal, use any funds at your disposal to pay down card debt or student loans. The more you pay, the faster you’ll be free of your obligations.
Did you save money at the grocery store by stacking coupons on top of sale prices? Or when buying something online by using Capital One Shopping? Use the savings to pay off debt. Did you work some overtime last week? Apply the extra earnings to your debt.
3. Make cuts to your spending
Take a good look at where your money is going and separate the necessities from mere wants. Skip daily trips to the local coffee shop or your favorite lunch spot. Over time, these savings can add up. Use them to dig out of the hole much quicker than you expected.
If you are struggling to figure out which expenses you can cut, start by crafting a budget. Use software such as You Need A Budget to help you get spending priorities on track. A service like BillCutterz can help you negotiate lower monthly bills and free up more money to put toward debt.
4. Double up on payments
Congratulations if you have paid off one credit card! However, accomplishing that goal doesn’t mean it’s party time. Keep the momentum going by allocating the funds that were being paid on that debt to boost payments on the next balance in line.
5. Use windfalls to pay down balances
If you get a sudden windfall — such as a tax refund or bonus at work — don’t spend it on a splurge. Instead, bite the bullet and use a portion of the funds to pay off debt.
6. Freelance to earn extra money
When figuring out how to pay off debt fast, don’t focus too much on saving money. Sometimes, the fastest solution is to earn more income.
Try your hand at freelancing to make a few dollars on the side. In some instances, you may be able to generate a substantial amount of cash, all of which should be contributed to the debt-payoff fund.
For more ideas on trading your skills for cash, check out “35 Clever Ways to Make Extra Money.”
7. Tackle debts with the highest interest rates first
Although some swear the best way to pay off debt is that you clear the debts with the lowest balances first to build momentum — it makes more financial sense to pay those debts with the higher interest rates first. They’re costing you more.
The ultimate goal is paying off debt fast, however, so the choice is yours. Whatever keeps you motivated.
8. Don’t sacrifice the things you love the most
Paying off debt may require you to make a few lifestyle changes, but it doesn’t have to be depressing. If you have a difficult time adjusting to new circumstances, implement gradual changes so the process won’t become too overwhelming.
If you need help on how to pay off debt fast, or maybe just a little guidance or advice, all you have to do is visit Money Talks News' Solutions Center and get the help you need.