9 fastest ways to pay off debt, according to experts
If you’re looking to reduce your debt this year, you’re not alone. According to Fidelity’s 2022 Financial Resolutions Study, 41% of respondents said paying off debt was one of their top financial resolutions.
When you’re paying off the debts you owe, it can be motivating to see that you’re making progress, which means your payment strategies need to be quick, efficient and effective. To that end, here are nine of the fastest ways to pay off debt, according to experts, so you can live a richer life.
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Introduction: how to calculate your debt ratio
Set an objective
“Make sure you understand why you want to get out of debt and what your goal is,” said Jay Zigmont, Ph.D., CFP and founder of Live, Learn, Plan, a Mississippi-based financial planning company. “Your goal should be SMART: Specific, Measurable, Achievable, Realistic and Time-bound. It’s not enough to say you want to get out of debt. Be specific, for example, I want to pay off $6,000 in debt over the next 12 months. Then you can break that down into mini goals of $500 per month.
Get a budget
“Make sure all your money has a job before the month starts,” Zigmont said. “If you plan to pay off your debt with what’s left, you’ll never progress. There are a lot of budgets out there. Budgets are like diets. The best is the one that works for you.
See more: How Millennial Women Can Take Control of Their Debt
Follow the Debt Avalanche Method
“Pay the minimum amount on all debt, but pay an additional amount on the debt with the highest interest rate each month,” said Lyle Solomon, senior counsel at OVLG Payday Loan Consolidation. “Keep going until you stop it. Once you eliminate him, pat yourself on the back. You have reduced your overall debt and the amount of interest you have to pay. Now you can focus on the next expensive debt.
Follow the Debt Snowball Method
Here is an alternative to the debt avalanche method.
“It involves paying the smallest balance first,” Solomon said. “Make extra payments on the smaller balance while making minimum payments on the others. Continue until you pay off the smallest balance. Once done, carry over the amount and apply it to the next smaller debt. Progress to the most significant balance. This method works and you get a psychological boost as you eliminate each debt.
Increase your income
“Finding a way to increase your income will increase cash flow or wiggle room in your budget, providing more money that can be allocated to paying down debt,” said Nika Boothe, founder of Debt Free Gonnabe. “Some quick ways to increase income are selling whole house items, asking for a raise, selling services or crafts, babysitting or keeping pets, etc. The more money that can be spent on paying down the debt, the further you can go toward paying off the principal, resulting in less interest accrued over the time it takes to pay off the debt.
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Pay every two weeks
If you want to pay off your mortgage faster, consider this suggestion.
“Consider paying your loan twice a month instead of once,” said Trae Bodge, smart shopping expert at TrueTrae. “By paying half (your payment) two weeks ‘early,’ the amount of interest you can save over time can save you years on your loan.
“When I started doing this with my first apartment in my mid-twenties, I had to hire an outside service, but nowadays many lenders offer this service. You just have to Get things done even faster by adding a little extra to your principal with every payment.
Ask for a lower interest rate on your credit cards
“A lot of people don’t know that the APR that goes into calculating their interest rate is variable, which means it can change from time to time,” Boothe said. “However, getting a lower interest rate means more of your payment can be applied to the principal and you’ll be charged less interest, which will help pay off the debt faster.
“The odds of getting a lower interest rate increase if you’ve had your card for a while and have an excellent payment history and/or have seen a recent increase in your credit score.
“It is important to specify, when requesting a lower interest rate, whether the new rate will apply to previous and/or new purchases and to note whether it is a promotion (for a limited time ). A simple but effective script is: “Hello, my name is X. I have been a client for X years and I am calling to see if I qualify for a lower interest rate.”
Related: Best balance transfer credit cards
Enjoy a balance transfer
“You can also transfer your high-interest credit card balance to a low-interest card,” Solomon said. “That’s where a balance transfer comes in handy. You can pay off your high interest credit cards with the Balance Transfer Card and then pay them off within 12-18 months at 0% APR. »
Use deals wisely
“When you get money back on your tax returns or a bonus from your workplace, it’s fun to take that financial windfall and book a trip with it or go shopping,” Bodge said. “Instead, take a piece and pour it over your main, and do it right away so you don’t even miss it. You can still have fun with some of the money, but putting extra money on your debt like this will help you pay it off faster.
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