Trying to get out of debt can be a daunting task, but creating a debt repayment plan is one of the best ways to manage this chore.
Debt repayment strategies combine actionable steps that could help you get rid of your debt for good. If you’re struggling to figure out how to pay off debt, here are a few suggestions to expedite the payment process.
10 ways to reduce your debt fast
1. Stop contributing to your debt
As you work toward debt freedom, it’s important that you don’t add more debt to the pile. While this can be a challenging habit to break, it’s imperative to continue moving forward.
Here are a few actionable steps you can start taking today:
- Take your credit cards out of your wallet and leave them at home.
- Implement the 48-hour rule, which stipulates that you’ll wait at least 48 hours before making an impulse purchase.
- Save for big purchases instead of taking out additional loans.
- Remove your credit card information from all websites where it’s saved. By removing your credit card information, you give yourself more time to think about your purchases before buying things online.
- Unsubscribe from your favorite retailers’ newsletters. Unsubscribing removes the temptation to act on the sales and discounts sent to your inbox.
2. Lower your interest rates
Creditors are sometimes willing to lower interest rates on your accounts. Usually, this strategy works best for credit card companies. You may first want to start by calling your credit card company and asking for an interest rate reduction, either for a period of time or permanently. Calling your credit card company is a free option that won’t impact your credit score.
Another option is to consider a balance transfer. In exchange for transferring your balance to a new or existing credit card, some companies provide promotional rates with low or no interest for a limited period of time. This allows you to make some progress on your debt without having interest added to it.
If you have multiple types of debt, you could consider debt consolidation. Essentially, you’re combining all your debt balances into one. Sometimes, debt consolidation can make debt more manageable and lower your interest rate.
Make sure to review all your options before moving forward. Making an impulse decision could negatively impact your financial situation.
3. Start a side hustle
Increasing your income is a great way to speed up your debt repayment. If you’re looking for ways to make extra cash, try starting a side hustle.
There are plenty of ways to monetize the resources, skills, and talents you already have. For instance, if you enjoy driving around town, you may consider working for ridesharing companies like Uber or Lyft.
4. Sell some of your things
If you have items collecting dust on your shelves or in your closets, it’s time to monetize it. Selling your things can be a good way to pay off debt while decluttering your house.
Consider selling items such as used electronics, vintage accessories, unused furniture, and more. You can use sites like eBay, Decluttr, and even Facebook Marketplace to unload your unwanted items.
5. Tighten up your budget
Take a look at your budget and determine areas where you can cut back on your spending. Minimizing your expenses — even just temporarily — could help you free up extra cash to put toward your debt repayment.
For example, review your recurring subscriptions and identify services that are going unused or you no longer need. You could either cancel these services or put them on hold until your debt is repaid, giving you extra cash for your debts.
6. Pay more than the minimum
Once you’ve freed up some extra cash, use these funds to make extra debt payments. Even if you can only pay an extra $15 or $30 a month, you’ll pay down your entire balance faster if you consistently pay more than the minimum.
And when you reduce the length of the loan and pay if off ahead of schedule, you’ll also reduce the amount of total interest you pay.
7. Use your windfalls for debt repayment
Expecting a bonus at work or getting a tax refund? Use this newfound cash to accelerate your debt repayment.
Putting your unexpected windfalls toward debt repayment is a strategic way to boost your financial stability.
8. Prioritize high-interest debt
Not sure which debt to pay off first? Prioritizing your high-interest debt can help you save money.
If you have several debt balances, select the one with the highest interest rate and direct your extra payments toward this balance. Once this balance has been repaid, move on to the balance with the next highest interest rate and repeat the process.
For example, if you have a $10,000 personal loan with a 15% APR and 60-month term, you’ll end up paying more than $4,000 in interest alone. If you also had a $10,000 student loan balance with a 5% APR and 60-month term, you’ll pay about another $1,300 in interest. If you focus on your personal loan balance first, you could pay off your debt faster and save money.
9. Use a cash-only system
While using credit is a convenient way to complete transactions, there’s no immediate penalty for overspending. In fact, a 2018 ValuePenguin report found that consumers were willing to pay as much as 83% more when paying with a credit card, in addition to leaving larger tips when paying with plastic.
By switching to a cash-only system, you may feel the impact of each purchase more immediately. When you use credit, however, you may not actually realize the cost until you review your statement.
10. Stay motivated
Repaying your debt can leave you feeling restricted, so it’s important to stay motivated throughout your debt repayment journey.
Try focusing on what you’ll do with the extra cash once your debt has been repaid. Do you want to go on a vacation? Or perhaps you want to purchase a new patio set for the summer months?
However you want to use your extra funds, start planning today. Thinking about the future will help you stay motivated and persist. Having an end goal in mind will make the entire process worthwhile.
Combining several of these suggestions could help you quickly reduce your debt. Once you develop a plan of action, paying off your debt may not seem as daunting.