Many people believe debt is a normal part of life. While true that most need a loan to buy a car or house, it’s misguided to accept debt as something that’s fine to have. That’s especially the case with high-interest debt, such as credit card debt.
The average family has over $8,000 in credit card debt, which can be debilitating. If you want to achieve debt freedom, it is possible. Here are ten proven ways to pay off debt faster in 2024.
Get on a Budget
The first step to getting out of debt fast is to start a budget. People often think that budgeting is restrictive or difficult. Fortunately, that is not the case.
Budgeting helps you get back on track financially by giving you the information necessary to see where you stand.
A budget allows you to get out of debt in three ways. These include: showing how much you earn, letting you see where each dollar goes, and showing how much you spend.
This helps you identify where you’re overspending and how to get it under control.
Consolidate Your Debt
Consumer debt, which includes credit cards, is known for having onerous interest rates. This usually makes the debt an even worse financial burden because it can add thousands of dollars in interest.
As a result, it may add years to your debt-free date. Nevertheless, you can speed this up through debt consolidation.
If you have multiple credit cards that all carry a balance, you are probably paying at least 20 percent on the indebtedness. You also likely have a different due date on each one.
Additionally, it usually lets you deal with one monthly payment and lowers your interest rates, often by half or more.
Select a Payoff Method
Paying off debt is as much psychological as it is financial. You need to find a payoff strategy that works for you. Finding the right one helps you ease stress and achieve financial freedom.
Choosing between the debt snowball or debt avalanche is something many people do. With the debt snowball method, you put all your extra money towards your smallest debt first. The debt avalanche works differently.
It focuses on the interest rates of your debt. You apply all of your extra money towards the highest rate. It doesn’t matter which you choose.
Repaying your debt is what matters most.
Find a Way to Increase Your Income
Increasing your monthly income is a terrific way to pay off debt faster. Yes, it’s important to reduce your spending or consolidate debt to achieve freedom sooner, but there’s only so much spending you can cut.
When I was in debt, I was a recent college graduate and had little extra income. I soon learned that making only the minimum payments would leave me in a cycle of debt for years.
I sold plasma, delivered pizza, and sold items I wasn’t using. All the extra money I earned went toward my debt.
If the take-home pay from your day job isn’t sufficient, a side hustle is an excellent way to amplify your repayment process and create extra room in your budget.
Stop Using Your Credit Card
If you struggle with overspending, ceasing your credit card usage is the first step to achieving debt freedom. This keeps you from making the situation worse.
Credit cards usually have sky-high interest rates. Continuing to use them as free money only makes the situation more difficult since your balance will keep climbing.
This strategy is difficult to implement, but it’s not impossible.
Use a Balance Transfer Credit Card
A new credit card can seem like an odd choice to start repaying debt. However, if your indebtedness is largely on credit cards, a balance transfer can be a legitimate way to get rid of debt quickly.
Nevertheless, it only works in certain circumstances. Here’s how a balance transfer works: you move the debt from your old credit card to a new card, and then you pay off the debt on the new card while the old one is brought to a zero balance.
Most balance transfer cards have a low or zero percent interest rate, and you have a set time to pay it off. Many cards allow up to 18 months maximum.
If you don’t repay the indebtedness in the given time, you might be charged interest on the entire balance you moved, starting from day one.
Pay More Than the Minimum
Do you think making the minimum monthly payment is doing something? I thought that as well. Unfortunately, that’s not the case.
It largely only results in money going towards the interest rather than the principal. This keeps you in the creditor’s clutches for longer.
For example, if you have $20,000 in credit card debt and make the minimum payment, it will take nearly 20 years to become debt-free.
Ask For a Lower Rate
Asking for a lower interest rate is a terrific way to kill debt. I used this trick to pay off my debt faster and save money on interest.
The less you pay in interest, the more that goes to the principal. This will save you money and likely shorten the time it takes to kill your debt.
The best way to lower your rate is to call your creditor and ask for a reduction. It won’t hurt to ask. Even if they lower it by a few percentage points, it can be an immense help.
If you have a good history with the creditor, they will likely work with you. Additionally, they know that they might have to sacrifice more if you opt for credit counseling through a service.
Streamline Your Spending
Attacking debt requires that you analyze your spending. This helps ensure more of your money is going to the debt instead of holding you back.
Evaluate all of your purchases and ask yourself a few questions: Am I receiving value from that purchase? When was the last time I used that service? Could I save money on that service?
Depending on your answers, you could free up more cash to apply to your debt. Canceling services you no longer use or negotiating lower prices are terrific ways to get more money to pay off debt.
Know Yourself
While this method isn’t as concrete, it is the fastest way to pay off credit card debt. You need to know yourself, your spending triggers, and your daily habits.
It’s important to step away from whatever tempts you to spend. This is different for everyone and is essential when learning how to become financially stable. Identify your triggers and actively look for ways to avoid them.
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I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.
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