9 Clever Ways to Pay Off Substantial Debt Fast

Despite the negative connotations, it's common to have some kind of financial debt, be it credit card expenses or a home mortgage. But debt can accumulate and that's when it becomes a problem.

The economic disruptions of the last two years — coronavirus pandemic, inflation, job changes or losses, medical expenses — could have added to many people's debt. The Federal Reserve says that consumer debt in the United States now totals more than $4 trillion.

But you don't have to be stuck in that situation. Here are nine top strategies for how to pay off debt.

One of the first and most important steps when it comes to dealing with debt is taking stock of just how much debt you actually have. For that, do an audit of your finances and a fresh budget. Then set up a timetable noting when money comes in, when the bills are due, what are your fixed expenses expenses, and how much money you can devote to debt repayment. Where can you cut back to pay off more debt?

While putting together your budget you might notice that you owe money to a variety of entities at various interest rates. One way to handle that is to try debt consolidation. At first it's a slightly complicated method, but it can lead to a streamlined process.

If, for instance, you're paying off credit card debt and a car loan, take out a new loan equal to the total amount owed and pay off those existing debts. Now you just have the single loan equal to the same amount — and with only one interest rate — left to deal with. However, if you can’t pay down that loan, you’ll wind up in the same debt hole as before.

If consolidating your debt isn't for you, this approach might be more manageable. To start your debt snowball, focus on paying off the smallest debts first. Once you pay off a small debt, use the money that would have gone to that payment to pay off the next smallest debt, and so on. This allows you to knock out debt one account at a time with clear benchmarks of success.

In 2016 the Harvard Business Review found this strategy more effective than equal payments on multiple accounts. The research found that this was the best strategy if someone cannot consolidate debts into one plan with a sizably lower interest rate than what they currently pay.

The snowball method is best if interest rates on each debt are relatively the same. If, however, one debt has a significantly higher interest rate, you might want to try the debt avalanche method.

Here, you make minimum payments on all debts, then put more money toward the debt with the highest interest rate. It may take longer to retire that debt, but it will save you interest in the long run. And once the big debt is paid, it will free up money to pay off the lower-interest debts.

Although some debts can be managed over time, it's the accumulated interest that can make it harder to pay off these accounts. Contact your bank and see if you can get a lower interest rate. There's no guarantee the lender will agree, but if you have been steady on payments and have no glaring red flags on your account, there is a chance the bank will lower your rate. You may be paying less in interest, which will clear that debt faster.

Transferring high-interest credit card debt to a 0% APR credit card is a common way to pay off debt. You will have one debt payment instead of multiple payments and your low interest rate typically lasts for a set period of time. This can make it easier to avoid the added costs of interest while you pay it down and give you a schedule to stick to.

Nothing is free, though: You will typically pay a percentage of the amount you’re transferring as a balance transfer fee. Also note that the 0% interest rate may only apply to the amount you’re transferring, not to new purchases.

If credit card debt is the problem, make it harder both psychologically and in action to use your cards. That could be simply not carrying the card with you when you're out or deleting it from any online profile you have with retailers such as Amazon.

It's obvious, but the less you spend, the less debt you accumulate while also trying to pay it down. Make this a habit alongside your budgeting for a speedier approach to debt relief. You will still have the card for situations where it's justified to use, but this strategy removes the ability to mindlessly spend on one-click purchases and the like.

If nothing else, it is a strategy that will force you to really think about whether you need that next purchase or not.

If you owe more, try making more. It is easier said than done in many cases, but consider approaching your boss for a raise or taking on more shifts for extra hours. You can also sell items online, from clothes you're not wearing to appliances you don't need. If you're financially OK each month beyond trying to pay off your debt, the extra money can go directly to those payments.

Pro-tip: If increasing your pay at your day job or finding a higher-paying one is proving difficult, consider starting one of the best side hustles.

Related: 6 unusual ways lazy people are boosting their bank account

There is no maximum amount one can pay when it comes to getting out of debt. If you're making it a priority, take the time to see what amount you're paying toward each account each month.

On credit cards, the minimum due payment each month is usually 2% of the total balance. If you're financially able, consider increasing the payment by a scalable, sustainable amount. The AARP recommends paying 15% of the total each time.

If it doesn't hurt your circumstances, paying more each month is a straightforward way to get out of debt faster. Remember, the more you pay on the balance, the less interest your debt accumulates.

Debt is an unfortunate part of life, and one that can easily pile up for anyone, regardless of income. Take the time to carefully budget, both what you can afford to spend and how much each month you're using to pay off your debt. Be organized and try to have a clear-cut plan for eliminating your debt, whether it's consolidation or paying off one account at a time.