Debt can leave you feeling trapped.
Even when you’re making minimum payments against your credit card debt, interest eats up the bulk of what you pay, and you see only minor gains — if you see any gains at all.
Even worse, when you have multiple debts, it can feel like you’ll never get ahead. After all, you’re already working hard enough as it is, and you’re still struggling with repayment.
If all this sounds exactly like your personal finance situation, it’s time to ask yourself a very serious question: What more can I do to get out of debt fast?
First, you have to prioritize your debt and attack debts with the highest interest rate first. Second, you need a debt repayment solution that fits your unique financial needs.
While every person’s debt portfolio looks different, there are best practice solutions most people consider to break free from the shackles of debt and achieve their financial goals.
In this article, we’ll introduce you to the options you can explore to get out of debt, improve your credit score, and otherwise strengthen your personal financial situation.
Americans are accustomed to financing everything
If you’re considering how to get rid of your debt, the first thing you need to know is that you’re not alone. In fact, most Americans seek financing to cover everything from big purchases, like home mortgages or car loans, to small purchases made with credit cards.
Overall, from 2020 to 2021, debt levels increased by 5.4%. By staying laser-focused on debt management and coming up with a repayment plan that helps your pay down your debt, you can save a significant amount of money over time instead of having your extra cash whittled away by high-interest debt.
Debt-free living made easy
If you’re looking to improve your financial health, raise your credit score, and get debt relief, you’ve come to the right place. Here are some tactics you can use to keep extra money in your pocket.
Pay the minimum payment plus principal
Unfortunately, if you just cover the minimum balance on credit card payments, you’ll usually end up spending more money on interest than the actual balance.
When you pay more than the minimum monthly payment, the excess funds will be applied to your entire balance. This means you won’t get too hurt by high interest rates and you’ll be able to get out of debt faster.
Even better: Try as hard as you can to pay your credit card bills in full each month because this type of debt is super expensive. If you’re in a deep debt hole, consider taking on a short-term, part-time job or starting a side hustle until you climb out of it.
How it works
There are two ways to ensure your payment takes a chunk out of the principal of your loan payments:
- You can continue to make monthly payments while increasing what you pay to ensure at least some of the funds are applied to the principal. For some debt payments, you can specify on a payment slip or online portal what amount is being applied to the principal.
- If you can’t pay your bill in a lump sum, you can also schedule a second payment to be made before the due date in the current billing cycle. This will help you spread out your payment allocations but still achieve the same result of paying extra each month — getting you started on your debt reduction journey.
Prioritize payoffs with the debt snowball method
If you’re going to get out of debt fast, you must begin paying some of these debts off. Start by putting your list of debts in order from biggest balance to smallest. Using the snowball method, you pay off your debts with the smallest balance first. By focusing on one debt at a time, you can prioritize which debts can be eliminated quickest.
How it works:
Continue to pay at least a minimum payment on every debt to ensure credit bureaus like Experian still look at your favorably. Then, make additional payments against the debt with the smallest balance until you pay it off in full. Once that’s done, start the process over with the next smallest debt balance on your list.
Or use the debt avalanche method instead
If you’re not keen on the snowball method, you can try the debt avalanche method, which encourages you to focus on the high-interest debt first and work your way down to debt with lower interest rates from there. It’s essentially just a mirror image of the snowball method.
When paying off your debt, there’s no right or wrong method to use. You just need to create a debt management plan and stick to it.
Ultimately, everyone has different financial preferences and is working with different lenders. So, while someone might benefit from the snowball method, another might find the avalanche method to be more effective.
When you’re trying to get out of debt, keep a pulse on the financial markets and try to recognize you may be able to get better interest rates on your debt compared to your current agreements. If you can, take advantage of these lower rates by refinancing current loans using a debt consolidation loan.
If this sounds intimidating, don’t sweat it. A loan specialist can help you through the process of refinancing a mortgage, home equity loan, auto loan, personal loan, or student loan.
Similarly, you can use credit card balance transfers to lower your credit card debt. If you have a credit card with a high balance, look for opportunities to transfer that balance to a card offering 0% percent APR for a set amount of time. Usually, this will give you six to 21 months to pay off the credit card without any interest fees. That should help you repair your credit report — making issuers happy, which comes in handy if you ever need to take on new debt.
How it works:
This solution requires you to do your research — or at least enlist the help of a credit counseling service. You’ll need to know the current terms of your loans and credit card interest rates. When you recognize opportunities for better interest, work with a trusted financial institution to refinance your loan. If you’re comfortable doing it yourself, just search for 0% APR credit card opportunities. A word of caution: If you plan to transfer a credit card balance, make sure you can pay off your debt by the time the promotion period passes.
Make lump sum payments
If you’re lucky enough to get a significant cash gift or a hefty tax return, put that money towards your debt (assuming you’ve already got an emergency fund built up). One large lump sum extra payment can significantly impact your debt-payoff goals.
How it works:
This one is easy. When you get a windfall of extra funds, apply it to your debt balance as fast as you can.
Settle your debts
At the end of the day, creditors just want to get paid. So, if you’re having trouble making payments while working your way out of excess debt, you might want to try your hand at negotiating with creditors. In many instances, creditors will agree to settle your debts, often for less than you already owe. Keep in mind that debt settlement can adversely affect your credit score if you stop making payments during negotiations. So, choose your course of action wisely.
How it works:
Pick up the phone and call your creditors if you’d like. If that thought makes you uncomfortable, hire a third-party settlement service to assist with this process for a fee. Just make sure you do your homework to confirm that the settlement company you select is credible. According to the Federal Trade Commission, there are risks associated with debt settlement. You just need to be on the lookout.
The road to financial freedom
Now, you have the blueprint to help you achieve financial freedom! Commit to tackling at least one of these solutions and watch your debt dwindle before you know it.
As you work your way out of debt, continue to analyze your current budget and make a spending plan. By doing so, you will continue to free up resources that can be applied to your debt.
As an added bonus, you’ll learn improved money management skills that can help you avoid future debt. By decreasing your debt, you’ll see your credit score go up — and your pulse rate go down — because living debt-free means living stress-free.
Here’s to getting out of debt — quickly and painlessly!