Debt is not something you want to hold on to for long and that is why you try your possible best to pay off as soon as possible. With 2021 just around the corner, now is the time to make all effort possible to pay off your debt.

We are going to provide you with practical steps you can take to pay off your debt in full. However, action is needed on your part to implement all the tip that will be provided here. Lets get started.

• How to Pay off Debt Fast in 2021
• What Debt Should I pay off first to Raise my Credit Score?
• How can I pay off 5000 in Debt Fast?
• Is it Better to pay off Debt all at once or Slowly?
• How to Pay Off Credit Card Debt
• How can I pay off my Debt When Broke?

How to Pay off Debt Fast in 2021

The fact is, more than half of Americans actually spend more than they earn each month, according to a Pew Research study, and use credit to bridge the gap.

So it’s easy to see how so many people are struggling with debt — and why some choose to bury their heads in the sand. For many in debt, the reality of owing so much money is too much to face — so they simply choose not to.

Read Also: Common Mistakes People Make That Keeps Them in Debt

Unfortunately, the space between realizing your debt is out of control and actually getting out of debt can be wrought with hard work and heartache. No matter what kind of debt you’re in, paying it off can take years — or even decades — to get out of debt.

Fortunately, some strategies exist that can make paying off debt faster — and a whole lot less painful. If you’re ready to get out of debt, consider these tried-and-true methods:

1. Pay more than the minimum payment

If you carry the average credit card balance of $15,609, pay a typical 15% APR, and make the minimum monthly payment of $625, it will take you 13.5 years to pay it off. And that’s only if you don’t add to the balance in the meantime, which can be a challenge on its own.

Whether you’re carrying credit card debt, personal loans, or student loans, one of the best ways to pay them down sooner is to make more than the minimum monthly payment.

Doing so will not only help you save on interest throughout the life of your loan, but it will also speed up the payoff process. To avoid any headaches, make sure your loan doesn’t charge any prepayment penalties before you get started.

If you need a nudge in this direction, you can enlist the help of some free online and mobile debt repayment tools, too, like Tally, Unbury.Me, or ReadyForZero, all of which can help you chart and track your progress as you pay down balances.

2. Try the debt snowball method

If you’re in the mood to pay more than the minimum monthly payments on your credit cards and other debts, consider using the debt snowball method to speed up the process even more and build momentum.

As a first step, you’ll want to list all of the debts you owe from smallest to largest. Throw all of your excess funds at the smallest balance, while making the minimum payments on all your larger loans. Once the smallest balance is paid off, start putting that extra money toward the next smallest debt until you pay that one off, and so on.

Over time, your small balances should disappear one by one, freeing up more dollars to throw at your larger debts and loans. This “snowball effect” allows you to pay down smaller balances first — logging a few “wins” for the psychological effect — while letting you save the largest loans for last.

Ultimately, the goal is snowballing all of your extra dollars toward your debts until they’re demolished — and you’re finally debt-free.

3. Pick up a side hustle

Attacking your debts with the debt snowball method will speed up the process, but earning more money can amplify your efforts even further. Nearly everyone has a talent or skill they can monetize, whether it’s babysitting, mowing yards, cleaning houses, or becoming a virtual assistant.

With sites like TaskRabbit and Upwork.com, nearly anyone can find some way to earn extra money on the side. The key is taking any extra money you earn and using it to pay off loans right away.

4. Create (and live with) a bare-bones budget

If you really want to pay down debt faster, you’ll need to cut your expenses as much as you can. One tool you can create and use is a bare-bones budget. With this strategy, you’ll cut your expenses as low as they can go and live on as little as possible for as long as you can.

A bare-bones budget will look different for everyone, but it should be devoid of any “extras” like going out to eat, cable television, or unnecessary spending. While you’re living on a strict budget, you should be able to pay considerably more toward your debts.

Remember, bare-bones budgets are only meant to be temporary. Once you’re out of debt — or a lot closer to your goal — you can start adding discretionary spending back into your monthly plan.

5. Sell everything you don’t need

If you’re looking for a way to drum up some cash quickly, it might pay to take stock of your belongings first. Most of us have stuff lying around that we rarely use and could live without if we really needed to. Why not sell your extra stuff and use the funds to pay down your debts?

If you live in a neighborhood that permits it, a good old-fashioned garage sale is normally the cheapest and easiest way to unload your unwanted belongings for a profit. Otherwise, you can consider selling your items through a consignment shop, one of the many online resellers out there, or a Facebook yard sale group.

6. Get a seasonal, part-time job

With the holidays coming up, local retailers are on the lookout for flexible, seasonal workers who can keep their stores operational during the busy, festive season. If you’re willing and able, you could pick up one of these part-time jobs and earn some extra cash to use toward your debts.

Even outside of the holidays, plenty of seasonal jobs may be available. Springtime brings the need for seasonal greenhouse workers and farm jobs, while summer calls for tour operators and all types of outdoor, temporary workers from lifeguards to landscapers.

Fall brings seasonal work for haunted house attractions, pumpkin patches, and fall harvest.

The bottom line: No matter what season it is, a temporary job without a long-term commitment could be within reach.

7. Ask for lower interest rates on your credit cards — and negotiate other bills

If your credit card interest rates are so high it feels almost impossible to make headway on your balances, it’s worth calling your card issuer to negotiate. Believe it or not, asking for lower interest rates is actually quite commonplace. And if you have a solid history of paying your bills on time, there’s a good possibility of getting a lower interest rate.

Beyond credit card interest, several other types of bills can usually be negotiated down or eliminated as well — we highlighted them in Six Bills You Can Negotiate Down to Save Money. Always remember, the worst anyone can say is no. And the less you pay for your fixed expenses, the more money you can throw at your debts.

If you’re not the negotiating type, a service like TrueBill can help. The app will review your purchase history to find forgotten subscriptions and other repeating fees you might want to cut from your budget, and it can even negotiate some bills down for you.

8. Consider a balance transfer

If your credit card company won’t budge on interest rates, it may be worth looking into a balance transfer. With some balance transfer offers, you can secure 0% intro APR for up to 18 months, although you might need to pay a balance transfer fee for the privilege.

If you have a credit card balance you could feasibly pay off during that time frame, transferring the balance to a card could save you money on interest while simultaneously helping you pay down debt faster.

9. Use ‘found money’ to pay off balances

Most people come across some type of “found money” throughout the year. Maybe you get an annual raise, an inheritance, or bonus at work. Or maybe you count on a big, fat tax refund every spring. Whatever type of “found money” it is, it could go a long way toward helping you become debt-free.

Each time you come across any unusual sources of income, you can use those dollars to pay off a big chunk of debt. If you’re doing the debt snowball method, use the money to pay down your smallest balance. And if you’re left with only big balances, you can use those dollars to take a huge chunk out of whatever’s left.

10. Drop expensive habits

If you’re in debt and consistently coming up short each month, evaluating your habits might be the best idea yet. No matter what, it makes sense to look at the small ways you’re spending money daily. That way, you can evaluate whether those purchases are worth it — and come up with ways to minimize them or get rid of them.

If your expensive habit is smoking or drinking, that’s an easy one — quit. Alcohol and tobacco do nothing for you except stand between you and your long-term goals.

If your expensive habit is slightly less incendiary – like a daily latte, restaurant lunches during work hours, or fast food — the best plan of attack is usually cutting way down with the goal of eliminating these behaviors or replacing them with something less expensive.

11. Step away from Debt

We’re all tempted by something. For many, it might be the local mall or our favorite online store. For others, it might be driving by a favorite restaurant and wishing we could pop inside for a favorite meal. And for those with a penchant for spending, having a credit card in their wallet is too much temptation to bear.

Whatever your biggest temptation is, it’s best to avoid it altogether when you’re paying down debt. When you’re constantly tempted to spend, it can be difficult to avoid new debts, let alone pay off old ones.

So, avoid temptation wherever you can, even if that means taking a different way home, avoiding the Internet, or keeping the fridge stocked so you aren’t tempted to splurge. And if you must, stash those credit cards away in a sock drawer for the time being. You can always bring them back out once you’re debt-free.

What Debt Should I pay off first to Raise my Credit Score?

Should you pay off your student loan first, or tackle your credit card balances? What about your mortgage, auto loan, or personal loans? While there’s no “wrong” way to pay off your debt, there are definitely some strategies that might help you to improve your credit scores sooner rather than later.

Start With Your Credit Cards

Generally speaking, it’s best to start with your credit card accounts when you’re ready to begin paying down your debt. Not only are these debts likely the most expensive you’ll ever carry, with interest rates in the high teens or higher, but carrying large balances on your cards will also have a negative impact on your credit scores.

Credit scoring models like FICO and VantageScore are designed to pay attention to the debt-to-limit ratios on your credit card accounts. This relationship between the credit card balances displayed on your credit reports and your account limits is formally known as your revolving utilization ratio.

When your revolving utilization ratio climbs because your balances start getting too close to your limits, you’ll generally end up with a lower credit score. In fact, 30% of your credit score points are based on that debt-to-credit-limit ratio.

As a result, when you begin to pay down your credit card balances, lowering your revolving utilization ratios, your credit scores will generally begin to climb. 

That fact, plus the high APRs, typically make credit card balances the perfect place to start when you’re ready to begin paying down debt: It’s a one-two financial punch that can simultaneously raise your credit score and save you big bucks on interest payments.

Start With the Smallest Balances

So you should probably begin your debt elimination journey with your credit card accounts. But which credit card should you pay off first?

You probably want to work your way up from the bottom. First, make a list of all of your outstanding credit card debts, from the smallest balance to the largest:

• ABC Bank: $500 balance
• QRS Bank: $4,000 balance
• XYZ Bank: $5,500 balance

By paying off the smallest balance first (ABC Bank in the example above), you’ll accomplish two important things: First, you’ll reduce your number of total accounts with balances. Second, you’ll bring the revolving utilization ratio on an individual account down to 0%. Credit scoring models will generally reward you for both of these actions.

Once you’ve paid off the smallest balance, you can move on to the next largest balance and repeat the process. This actually dovetails with the “Debt Snowball” approach to debt elimination, helping you build and maintain momentum with small victories in the critical early stages of debt reduction.

Just remember to continue making at least the minimum payment on all of your accounts to avoid late fees and potential credit score damage.

What About Installment Loans?

Most of the non-credit card accounts appearing on your credit reports will probably be installment accounts. These debts feature a fixed payment scheduled over a specific period of time. Mortgages, auto loans, and most personal and student loans fall into this category.

Because installment loans are not as indicative of future risk as credit card accounts, credit scoring models don’t pay as much attention to the balances on these types of accounts. The initial impact of installment debt on your credit scores is not going to be significant. As a result, paying off such debts probably is not going to have a positive impact on your credit scores either.

Of course, it can still be a sound financial move to pay off installment debts (especially if you’ve already tackled your credit card balances). But you should have realistic expectations about how big an impact paying off installment debt may have on your credit scores — which won’t be much, if any.

How can I pay off 5000 in Debt Fast?

Estimates abound for how much credit card debt the average American carries, but the number that matters most is your number. Let’s say it’s $5,000.

Here’s a six-step plan to crush that debt over the next 12 months:

• Freeze your credit use. Remove the card or cards from your wallet and store them someplace safe. If the plastic is not readily available, you’re less likely to be tempted to use it.
• Create a safety net. Start small and work toward saving $1,000 in a savings account. Having this cash cushion will keep you from charging expenses to your credit card in the event of emergencies.
• Develop a plan. If you only make the minimum payments, you won’t make much progress due to accrued interest. So, you need to increase those payments a little at a time — to reach $500 a month, to be specific. Canceling cable, eating out less or clipping coupons are all changes that can help. Look for items you no longer use to sell online or at a garage sale. You may also want to consider a second job, a new job for a stay-at-home spouse or an entrepreneurial endeavor to boost income.
• Contact your creditor. See if consolidating all your balances to a credit card that may have a lower APR would help. If you need additional help, consider contacting a reputable, non-profit credit counseling agency.
• Execute the plan. If you’ve got one credit card, your path is simple. Apply all the extra monthly cash in your new budget toward that credit card until it’s paid off. If you have more than one card, start by paying as much as you can on the card with the highest interest rate and minimum payments on the rest. When that card is paid down, work on the next one.
• Make the most of windfalls. Put your tax refund, a bonus at work or an inheritance toward your goal. Every little bit helps.

Take small steps at a time, and don’t get discouraged if you encounter roadblocks. It may take a few extra months, but you’re headed in the right direction.

Is it Better to pay off Debt all at once or Slowly?

If you’ve come across extra cash and have credit card debt, you may wonder whether it’s a good idea to pay off your balance all at once or over time. You may have heard carrying a balance is beneficial to your credit score, so wouldn’t it be better to pay off your debt slowly?

The answer in almost all cases is no. Paying off credit card debt as quickly as possible will save you money in interest but also help keep your credit in good shape. Read on to learn why—and what to do if you can’t afford to pay off your credit card balances immediately.

Does Paying Off Credit Cards Slowly Help My Credit Score?

It’s an oft-repeated credit myth that carrying a credit card balance helps your credit scores. In reality, high balances on revolving credit accounts can mean high credit utilization, which can hurt your credit standing.

Your credit utilization ratio is a comparison of your credit card balance to your total credit limit, expressed as a percentage. It’s the second most important factor in your credit score calculation, making up 30% of your FICO^® Score^☉ .

To calculate it, divide your total credit card balances by your total credit card limits. The lower the ratio is, the better for your credit health. Keep it under 30% to avoid hurting your scores; experts suggest keeping it under 7% for the best scores.

The effect credit utilization has on your credit scores is a strong argument for paying off your credit card balances every month—but it’s not the only one. Carrying a balance can cost you heavily in interest.

How to Pay Off Credit Card Debt

The impact on your credit and finances of carrying credit card balances should be enough to convince you that low or no credit card debt is best. But don’t get discouraged if you can’t afford to pay off your credit cards all at once.

The average U.S. consumer carries a credit card balance of nearly $6,200, not an amount most can quickly come up with. While it may feel overwhelming, try to focus on paying down the debt as soon as possible.

Here are strategies to help you pay off credit card debt.

Debt Avalanche Method

The debt avalanche method of paying down credit card debt can help you save money on interest. After making minimum payments on all of your credit cards, put some extra money on the card with the highest annual percentage rate (APR).

Once it’s paid off, move to the card with the next highest APR, and so on. This will allow you to decrease the total amount you’ll pay by reducing the amount of interest you accrue.

Snowball Method

While getting rid of high-interest debt first makes more sense financially, it can be hard to stay motivated if that card’s balance is high and taking a long time to pay off. In that case, it might be wise to look into the snowball method.

With this method, you put extra money toward the credit card with the lowest balance while continuing to make minimum payments on the rest of your cards. After that card is paid off, apply the extra funds to the card with the next lowest balance, and so on.

You will pay more in interest in the long run with the snowball method but you’ll see progress paying off cards sooner, which can encourage you to keep going.

Debt Consolidation

If you have a good credit score, it might make sense to look into debt consolidation.

One way to consolidate debt is by getting a balance transfer card that comes with an introductory 0% APR for a set period. During this period, which can last as long as 21 months, you pay no interest on the balance you’ve transferred.

This will help you lower the amount you owe because you’ll pay less in interest—as long as you pay off the entire transferred balance by the end of the introductory period.

Another option is to take out a debt consolidation loan with a lower interest rate than your credit cards have. The idea is to combine multiple balances into one loan with fixed monthly payments to save on interest and possibly pay off the debt faster. Rolling numerous payments into one can also make it simpler for you to manage your debt.

Before choosing a strategy to deal with your credit card debt, it’s a good idea to check your credit score. Balance transfer credit cards typically require a good to excellent credit score. And while it might be possible to qualify for a debt consolidation loan with poor credit, the interest rates may be higher than the APRs on your current credit cards.

How can I pay off my Debt When Broke?

Getting out of debt isn’t easy for anyone, but it’s an even tougher feat for if you don’t have much money to spare. You can pay off debt when you’re broke, but not without making some financial changes first. Here are 10 ways you can get it done.

Create a Budget

A budget will help you make better decisions about your money and give you an idea of how much you can afford to put toward your debt each month.

Don’t try to manage your expenses in your head; seeing the numbers on paper lets you see the bigger picture without relying on your memory. Your budget can also help you decide where you might be able to free up money for paying down your debt.

Distinguish Between Broke and Overspent

Are you using “broke” to describe what happens after you’ve spent all your money on nonbills and nonessentials? If so, you’re not really broke.

You can make some changes to how you spend to create some extra room in your budget. If you really are broke, don’t make it worse by making bad decisions—such as spending on things you don’t need.

Put Together a Plan

Paying off your debt should always start with a plan, no matter how much money you have—and even if you can’t start paying on your debt right away. Start by listing your debts along with the balance and interest rate.

Prioritize your accounts, noting the order you want to pay them off, for instance, highest interest rate debt first, lowest balance first, or another order. 

The plan is to pay as much as you can afford on one account while paying the minimum on all the other accounts. Ideally, you’ll find ways to free up more cash in your budget (more on that below), but to start, work with what you have.

Stop Creating Debt

You’ll never get out of debt if you’re continually adding to your balances. Cut up your credit cards and don’t apply for any more loans so you don’t have the ability to create additional debt.

New debt increases the payments you have to make, which creates additional strain on your monthly income. It’s tough to live without credit cards when you’re broke, but if you’re serious about getting out of debt, it’s critical that you find a way to live on your income.

Look for Ways to Cut Your Expenses

Don’t guess about it. Review your monthly bank statements to see where you’re spending money each month. For each purchase, ask yourself seriously whether this is an expense you can live without. Remember, you’re not cutting costs just for no reason at all.

You’re doing it so you can get out of debt. It’s a worthy goal. You may have to make some temporary sacrifices, but you can add expenses back after you’re debt-free if you decide those expenses are worth it.

Increase Your Income

Making more money accomplishes two goals. First, you’ll no longer have to rely on your credit cards to make ends meet. Second, you’ll have more money available to put toward your debt.

You can increase your income by taking on a second job, doing freelance work, selling things on eBay or Craigslist, making money from a hobby, doing odd jobs or starting a small business.

Ask Your Creditors for a Lower Interest Rate

A high-interest rate makes it harder to pay off your debt because more of your monthly payment goes toward interest charges. Lowering your interest rate reduces the monthly interest you pay and allows you to pay off your debt faster.

Read Also: How to Get Out of Debt Working a Minimum Wage Job

A good credit score and positive payment history give you more leverage toward getting a lower interest rate. If your credit card issuer won’t budge, consider transferring your balance to a credit card with a lower interest rate. Taking advantage of a 0% balance transfer offer is even better.

Pay on Time and Avoid Fees

Late payments slow down your debt pay-off progress. You’ll have to double up on payments next month plus pay a late fee—money that could have reduced your balance. Plus, two late credit card payments in a row will trigger the penalty rate, which will also make it tougher to pay down your debt. 

Consider Consumer Credit Counseling

A credit counseling agency can work with you to review your finances and figure out a budget that can include monthly debt payments. If you can’t afford your debt payments, the credit counselor will try to work out a debt management plan (DMP) with your creditors.

The DMP will often include lower monthly payments to your creditors, and you might make one monthly payment to your credit counselor who will then distribute payments to each of your creditors.

Take It One Step at a Time

Looking at your total debt picture can be overwhelming, but remember that you’re not going to tackle it all at once. By concentrating on one debt at a time, your debt repayment process will be more effective. Track your progress, celebrate your successes, and keep chipping away until your debt is completely paid off.

FInally

It’s easy to continue living in debt if you never have to face the reality of your situation. But when disaster strikes, you can gain a brand new outlook in a hurry. It’s also easy to get sick of the paycheck-to-paycheck lifestyle, and look for ways to get out from under the crushing weight of too many monthly payments.

No matter what type of debt you’re in — whether it’s credit card debt, student loan debt, car loans, or something else — it’s important to know there is a way out. It may not happen overnight, but a debt-free future could be yours if you create a plan — and stick with it long enough.

No matter what that plan is, any one of these strategies can help you get out of debt faster. And the faster you become debt-free, the quicker you can start living the life you truly want.