Paying down your debt faster may help you get a head start on your goals, whether it’s applying for new credit, saving on the cost of borrowing, or just reducing your debt. Here are some strategies to think about when considering repayment plans that could help you pay your debt off faster.
Tips for paying off debt
Pay more than the minimum.
Pay off your debt and save on interest by paying more than the minimum every month. The key is to make extra payments consistently so you can pay off your loan more quickly. Some lenders allow you to make an extra payment each month specifying that each extra payment goes toward the principal. Before you begin, check the terms of your loan to determine whether additional fees or prepayment penalties may apply.
Pay more than once a month.
Pay your credit card bills more than the required once per month. This may make it easier to stay on track of how much you owe. Paying your credit card bill regularly may also lower your balance/utilization ratio. The credit utilization ratio is the percentage of your total available credit that is currently being used. The utilization ratio is one of the components used by credit reporting agencies to calculate your credit score.
Pay off your most expensive loan first.
Your most expensive loan is the loan with the highest interest rate. By paying it off first, you’re reducing the overall amount of interest you pay and decreasing your overall debt. Then, continue paying down debts with the next highest interest rates to save on your overall cost. This is sometimes referred to as the “avalanche method” of paying down debt.
Consider the snowball method of paying off debt.
This involves starting with your smallest balance first, paying that off and then rolling that same payment towards the next smallest balance as you work your way up to the largest balance. This method can help you build momentum as each balance is paid off. Understand the pros and cons of this debt pay down strategy by reviewing the Snowball versus Avalanche methods of paying down debt.
Keep track of bills and pay them in less time.
Stay on top of your debt by using bill reminders and Online Bill Pay. Simply schedule the amounts you want to pay and when you want to pay them. You can also set up payment reminders and receive eBills from payees offering electronic billing.
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Options for paying off debt
Shorten the length of your loan.
Refinancing your debt to a shorter term may help you pay it off faster and save on the total cost of borrowing.You may be able to qualify for a lower rate, or a shorter or longer loan term, depending on your situation. Remember, shortening the term of your loan could increase your monthly payments.
Consider Refinancing
Consolidate multiple debts.
Loan consolidation may help you repay debt faster by combining several high-interest rate loans or credit card balances into one new loan ideally with a lower interest rate.
- Consider debt consolidation
- Personal loan for debt consolidation
- Debt Consolidation Calculator
Credit score tip
Trying to eliminate all of your debt? Keeping credit accounts open, and paying the balances in full every month, may help you maintain or increase your credit score.
Next Step:
Understand the total cost of borrowing
When considering a new loan or restructuring your current debts, remember to consider your borrowing costs. Extending the term of your loan may lower your monthly payment, but you may pay more in interest over the life of the loan, increasing your total payments.
Learn more
Products to consider
- Personal Loan
- Mortgage Refinance
Before you apply, we encourage you to carefully consider whether consolidating your existing debt is the right choice for you. Consolidating multiple debts means you will have a single payment monthly, but it may not reduce or pay your debt off sooner. The payment reduction may come from a lower interest rate, a longer loan term, or a combination of both. By extending the loan term, you may pay more in interest over the life of the loan. By understanding how consolidating your debt benefits you, you will be in a better position to decide if it is the right option for you.
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FAQs
Pay off your debt and save on interest by paying more than the minimum every month. The key is to make extra payments consistently so you can pay off your loan more quickly. Some lenders allow you to make an extra payment each month specifying that each extra payment goes toward the principal.
How can I accelerate my debt payoff? ›
Set up a payment plan
Prioritize your debts, ordering them from high to low interest. Check your budget to determine how much you can put toward monthly debt payments. Be sure you're able to make all minimum payments and determine how much extra you'll have to reallocate to your highest-interest loan.
How can I pay off my debt quicker? ›
Pay more than your minimum balance
To positively impact your debt, it's a good idea to pay more than the minimum payment requirements. If you find that you are financially able to do so, paying more off each month could mean that you pay off your debts faster, and you'll pay less interest.
How to get out of $20,000 debt fast? ›
If you have $20,000 in credit card debt that you need to pay off in three years or less, you have multiple options to consider, including:
- Take advantage of a debt relief service.
- Consolidate your debt with a home equity loan.
- Take advantage of 0% balance transfer credit cards.
To pay off $8,000 in credit card debt within 36 months, you will need to pay $290 per month, assuming an APR of 18%. You would incur $2,431 in interest charges during that time, but you could avoid much of this extra cost and pay off your debt faster by using a 0% APR balance transfer credit card.
How can I speed up my debt repayment? ›
Pay off your most expensive loan first.
By paying it off first, you're reducing the overall amount of interest you pay and decreasing your overall debt. Then, continue paying down debts with the next highest interest rates to save on your overall cost.
How to pay off $5000 credit card debt fast? ›
Take a strategic approach
- Debt snowball: With the debt snowball method, you make minimum payments to all your credit card lenders with the exception of your lowest balance. Send all of the extra money to this account. ...
- Debt avalanche: Make minimum payments on all but your credit card with the highest interest rate.
How to get out of debt
- List out your debt details.
- Adjust your budget.
- Try the debt snowball or avalanche method.
- Submit more than the minimum payment.
- Cut down interest by making biweekly payments.
- Attempt to negotiate and settle for less than you owe.
- Consider consolidating and refinancing your debt.
The 6-step method that helped this 34-year-old pay off $30,000 of credit card debt in 1 year
- Step 1: Survey the land. ...
- Step 2: Limit and leverage. ...
- Step 3: Automate your minimum payments. ...
- Step 4: Yes, you must pay extra and often. ...
- Step 5: Evaluate the plan often. ...
- Step 6: Ramp-up when you 're ready.
Pay the largest or highest interest rate debt as fast as possible. Pay minimums on all other debt. Then pay that extra toward the next smallest debt. Paying off a big debt can boost a feeling of control and gets rid of big interest, too.
How to get out of debt when you have no money
- Step 1: Stop taking on new debt. ...
- Step 2: Determine how much you owe. ...
- Step 3: Create a budget. ...
- Step 4: Pay off the smallest debts first. ...
- Step 5: Start tackling larger debts. ...
- Step 6: Look for ways to earn extra money. ...
- Step 7: Boost your credit scores.
On This Page. President Biden announced new plans to cancel student debt under the Higher Education Act. If implemented as proposed, these plans would authorize waivers to: Cancel up to $20,000 in interest for all borrowers who have accrued or capitalized interest on their loans since entering repayment.
How to pay off $18,000 in debt fast? ›
- Make a List of All Your Credit Card Debts. You can't get where you're going if you don't know where you are. ...
- Make a Budget. ...
- Create a Strategy to Pay off the Debt. ...
- Pay More Than Your Minimum Payment. ...
- Set Achievable Goals. ...
- Consider Debt Consolidation. ...
- Seek Credit Counseling.
- Step 1: Take Inventory of Your Debts. ...
- Step 2: Create a Realistic Budget. ...
- Step 3: Avoid Any New Debts. ...
- Step 4: Try the Debt Avalanche Method. ...
- Step 5: Consider the Debt Snowball Method. ...
- Step 6: Increase Your Income. ...
- Step 7: Negotiate a Better Rate. ...
- Step 8: Increase Your Credit Score.
7 ways to pay off $10,000 in credit card debt
- Opt for debt relief.
- Use the snowball or avalanche method.
- Find ways to increase your income.
- Cut unnecessary expenses.
- Seek credit counseling.
- Use financial windfalls.
A minimum payment of 3% a month on $15,000 worth of debt means 227 months (almost 19 years) of payments, starting at $450 a month. By the time you've paid off the $15,000, you'll also have paid almost as much in interest ($12,978 if you're paying the average interest rate of 14.96%) as you did in principal.
How can you accelerate your payoff date? ›
Tips to pay off mortgage early
- Refinance your mortgage. ...
- Make extra mortgage payments. ...
- Make one extra mortgage payment each year. ...
- Round up your mortgage payments. ...
- Try the dollar-a-month plan. ...
- Use unexpected income.
Tips for Getting Out of Debt When You're Living Paycheck to Paycheck
- Tip #1: Don't wait. ...
- Tip #2: Pay close attention to your budget. ...
- Tip #3: Increase your income. ...
- Tip #4: Start an emergency fund – even if it's just pennies. ...
- Tip #5: Be patient.
Pay More than Your Minimum Payment
Paying a little extra each month can reduce the interest you pay and reduce your total cost of your loan over time. Continue to make monthly payments even if you've satisfied future payments, and you'll pay off your loan faster.
How do you negotiate a debt payoff? ›
Steps to negotiate your debt
- Work with a credit counselor.
- Enroll in a debt management program.
- Try various debt payment strategies like the snowball method.
- Ask the creditor for a payment deferment.
- Ask for a lower interest rate.
- Consider a debt consolidation loan.
