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11 Ways to Pay Off Debt Right Now

11 Ways to Pay Off Debt Right Now
Amy Boyington May 19, 2018
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Paying off debt is one of the most significant struggles Americans face right now. Americans currently hold over $1 trillion in credit card debt, which doesn’t include all the other obligations they owe, like student loans, mortgages, and auto loans.

Knowing you’re not alone may ease your fears a bit, but it won’t help you pay off that debt.

You already know that paying what you owe means that you’ll have less money going toward debt and more to use for bills, savings, and other essential things in your life now and in the future.

You also know that it’s never as simple as people make it sound to pay off your debt.

Since no one strategy will work for everyone, it’s better for you to have a few solid ideas to try to get you out of debt as quickly as possible.

When you make the process of paying off debt more manageable, you’ll find it easier to stick with and will see yourself digging out of the hole faster.

Try some of these helpful and realistic suggestions for getting rid of your debt fast:

1. Ask for Help

One thing a lot of people do when they look for solutions for their debt is skip over the most obvious answer: asking people they know for help.

Maybe it’s a pride issue, or perhaps it’s just that this answer is almost too obvious that we don’t think about it. Either way, the fact is that this solution is right there for the taking for a lot of people and it’s one that’s worth considering.

No one wants to crawl to their parents, siblings, or friends for help. I guarantee you, though, that these people will probably be more willing to help you than you think, especially if you’ve never given them a reason to believe you’re untrustworthy.

If you have a high-interest credit card that you just can’t seem to chip away at, see if your parents or a trusted friend can pay it off for you.

Treat it just like you would a loan from the bank. Negotiate terms and interest rates and offer to pay as much as you can afford every month.

Just be sure to get everything in writing. Even though you are getting help from someone you know doesn’t mean you won’t get burned. Type up a loan agreement, have it signed by both of you, and uphold your end of the bargain until you pay off your debt.

2. Stick to a Budget

Having a set budget that accounts for every single penny that you make every month can have a profound impact on your ability to get the debt paid off.

You’ll be less likely to spend frivolously when you account for all your income and divvy it up into bills, groceries, savings, and other expenses.

This is the beauty of a zero-based budget, in which your income minus your expenses will equal zero.

That doesn’t mean you have to spend your money until it’s gone. Instead, you have a plan for everything, from how much you’ll spend eating out to how much you’ll pay for gas for your car.

Anything that’s left over after paying your bills, rent, entertainment and anything else you’ll need each month should automatically go toward savings and paying extra toward your debt.

I like to split my extra cash right down the middle, putting half into my savings account and the other half toward whatever credit card I’m working to pay off first.

You don’t have to use zero-based budgeting, though. You’ll have the most success sticking to a budget when you find one that works with your lifestyle and income.

Whatever that is, just make sure you stick to it and always make plenty of room in your budget for putting some extra cash toward your debt.

3. Avoid Paying the Minimums

It’s tempting to pay only the amount shown in the Minimum Balance section of your monthly credit card bill. Most people don’t know that the minimum balance is a number that creditors use to keep you in debt for as long as possible.

You feel like you should be making a dent in your debt but you’re not making much of one – and that’s exactly where your creditors want you to be.

The longer you take to pay off your debt, the more interest you’ll pay. Most credit card companies only require about 2% or 3% of the balance paid every month.

That barely covers the interest tacked on at the end of the billing cycle, which means you’re paying mostly interest and very little principal.

Set your sights on paying at least 5% of your balance if possible. If it’s all you can afford, at least stick to something more than the minimum payment. Even an extra $10 each month can eat away at your principal faster than your minimum payment can.

4. Set Up Auto-Savings and Transfers

Keep it simple, stupid. That’s a phrase you should learn to live by if you want to wipe away your debt fast. The less you think about money and over-analyze everything about it, the easier it will be for you to adopt a healthy financial style.

Keep your finances simple by letting technology foot some of the hard work. I love banks that let me set up auto-transfers to other bank accounts.

It keeps money going directly to savings and out of my hands completely. I get used to the transfers happening and write them down in my transaction register every week without thinking about it.

Set yourself up with a bank account with auto-transfers to another account that you can use to pay off your debt.

I like the simplicity of Capital One 360’s accounts and auto-transfers because I can instantly move money between accounts and set up recurring transfers.

Set up transfers weekly by taking your full budget for extra cash to put toward your debt and splitting it up into four weeks. At the end of the month, put all that money you transferred to your preferred debt. You’ll find that you’re less tempted to spend that money when you know it’ll get whisked away for a good cause.

5. The Debt Avalanche

There are a lot of ways to tackle debt, but two of the most popular methods are what’s known as the debt avalanche and the debt snowball.

They work using the same technique: tackle one debt at a time and, as you pay each one off, use the money you were paying on that debt toward the next one on the list. The strategy you use for each one will be different though.

The debt avalanche focuses on paying off your debts with the highest interest rates first.

These are usually credit cards, which tend to have interest rates that hover between 14% and 26%. If you’re paying only the minimum on these cards, you’re probably paying mostly interest.

The debt avalanche helps you pay off high-interest balances first so that more of your money can go toward principals on other debts.

Write down all your debts with their interest rates and minimum payments. Include student loans, car loans, and any other obligations. Line them up with the highest-interest debt first.

This is the one you’ll focus on paying off right now.

Also, write down how much you can afford to spend monthly on your debt payments. Subtract the total of minimum payments for all debts from this number to get your surplus.

If you can pay $800 per month and your minimums equal $500, your surplus is $300.

Your surplus will go toward the first debt on your list every month, in addition to the minimum payment, until it’s paid off. Remember to adjust your surplus as needed if your income varies month-to-month.

6. The Debt Snowball

An avalanche happens when snow tumbles down and wipes out things in its path below, much like you’re doing when you pay off high-interest debt first to make it easier to crush your other debts.

Think of the debt snowball as the opposite: you start with small debt and work your way to the larger ones, much like how you’d start a little snowball and make it larger by adding snow.

The idea behind the debt snowball is that, once you get a small debt paid off, you’ll motivate yourself to keep your eye on the prize of being debt-free. It’s an excellent technique to use if you’re struggling to find the drive to keep paying off your debt.

Write down all your debts and then order them from the smallest to the most significant debt. Don’t worry about interest rates or minimum payments; you only need to focus on your balances. The debt with the smallest balance will be your focus for now.

Use the same technique for creating a surplus as you would for the debt avalanche. Your surplus amount will go toward your smallest debt every month until it’s paid off.

If your debt is only $200, you can pluck away at it fast and then use the payment for that debt toward your next.

7. Get a No-Interest Balance Transfer Card

Some people shy away from opening a new credit card when they already have balanced piling up.

If you’re responsible with your cards (or at least know that you can be now), then there’s no reason to be afraid of having a new credit card. In fact, the right card can be incredibly helpful in your efforts to pull yourself out of debt.

What you need is a credit card that’s meant for balance transfers. These cards will let you transfer balances from other cards for zero interest for a specific number of months, usually between 9 and 15.

The more months you have, the better, because you’ll have more time to spread out your payments and get your balance paid off.

Say you have a credit card with a 23% interest rate and a balance of $2500. If you pay $200 a month, it will take you 15 months to pay it off and you’ll pay almost $400 in interest.

When that balance is on a zero-interest credit card, you can pay it off in 13 months, all toward the principal balance.

Be sure to look for a card with no balance transfer fees or annual fees that will increase your balance.

8. Get a Loan from a Credit Union

Taking out a personal loan to pay off credit cards and other debt isn’t something most financial experts advise, but sometimes it’s necessary.

You could end up with a much better interest rate from a new loan than you had, which can help you get rid of your debt faster. You’ll also be able to consolidate debt to make your payments more manageable.

Instead of getting caught up applying for online loans from sketchy lenders, take a trip to your local credit union.

Credit unions are known for having some of the best interest rates around and even people with poor credit can get financed. The credit union will run your credit and come up with an interest rate based on that and your income.

Most credit unions will require you to become a member before they process your application and may also ask for a small application fee. That’s it. The process is quick and easy compared to going to a traditional lender.

9. Renegotiate Your Credit Card Terms

I always balked at the people who suggested negotiating your credit card balances and interest rates with a customer service representative at the company. Then I decided to give it a try. The worst they could tell me was no.

To my surprise, I was able to negotiate a deal to lower my interest rate with the very first card company I called. It was my highest-interest card and I got it dropped to match an interest rate on a similar card – by 2%! Every little bit helps.

Most people won’t be eligible for negotiating a balance payoff unless they’ve fallen behind on payments or can offer a good portion of the balance as a lump payment.

However, you definitely can wiggle your way to a better interest rate or maybe even a zero-interest balance transfer offer.

If the first person you talk to says that he doesn’t have the ability to change anything with your account, then ask to speak to someone who does.

You don’t have to be pushy, just be firm. Every little bit helps when it comes to getting ahead in the debt department.

10. Refinance Your Current Loans

You can also talk to your lenders to ask about refinancing your loans. After a year or more of timely car payments, your lender may be more willing to negotiate a better interest rate or a lower monthly payment.

If your current lenders don’t budge, then research some other lenders who might be able to help. Again, speaking with your credit union is usually a great way to go for a loan with more flexible terms.

You also might consider researching consolidation loans to lump your credit card payments or student loans into one loan with a better interest rate and lower payments.

Speaking of student loans, don’t forget that you have a lot of options for refinancing there. Contact your lenders to discuss your options, like loan consolidation or income-based repayments.

11. Get a Side Gig

When all else fails, look for ways to generate more income without trying to squeeze in another job for an hourly rate. Side gigs are the way to go if you want something super flexible as far as your schedule and income are concerned.

Side gigs let you be your own boss. You choose when you want to work and what rates you set for yourself, therefore determining how much you make.

Find people who need help from someone with your skillset. Some in-demand skills you can use for inspiration include:

  • Computer set up and repair
  • Car repair and detailing
  • Handy work around houses or offices
  • House or office cleaning and organization
  • Pet or babysitting
  • Article, blog, or copywriting
  • Landscaping
  • Delivery services
  • Construction or remodeling

Whether you want to work in-person or online, you can easily find something that fits your skills.

Enter your side gig with the goal that all money you make from it goes toward paying off your debt. You’ll hopefully only need to double up your work for a few months to put a massive dent in your balances.

Final Thoughts

Paying your debt isn’t a fun thing. I get that. But once you start to realize it is possible, you won’t feel so overwhelmed.

The most important thing is to get the ball rolling. People talk about taking “baby steps” whenever they have to face something that’s stressful or scary. Paying debt is no exception. Once you start making dents in what you owe, you’ll have some motivation to keep going.

Set small, immediate goals and some long-term goals for yourself. Small goals can look like setting aside $50 a week to pay a credit card balance, while larger goals can focus on where you see yourself, financially, in three years (hopefully debt-free or close to it!). Stick to those goals and keep crushing your debt to reach them.

Have you paid off your debt or are you still working on it? What methods have you used? We want to hear from you! Let us know your thoughts in a comment.

Amy Boyington

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