It could be daunting and intimidating to get your finances under control when having a mountain of debt.
Luckily, it’s possible to get out of debt fast regardless of your financial status, geographical location, and credit score.
When you commit to making an effort for a debt-free future, you need to know what you owe, plan how to pay it off, reduce your spending, and increase your income.
In this post, you will learn simple tips on how to get out of debt fast (even on a low income).
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Why Is Getting Out Of Debt Fast Worth It?
Before we dive into how to get out of debt fast, let’s take a close look at what you can benefit from a debt-free lifestyle.
It’s so easy to rack up debt these days, but it’s not easy to come out of the debt trap.
According to CNBC, 73% of Americans believe their finances are the No. 1 stress in life.
Financial holes can put mounting pressure financially and physiologically on borrowers in life (e.g., relationship and personal health) andhold you back from all your money goals for years.
Imagine what your life will be like without debt; you can get back on secure ground and build a solid financial life.
That means you don’t have to wake up in the middle of the night because of debt worries, and there are no more harassing calls from debt collectors. And for sure, you won’t miss the headaches.
Instead, you can save more, earn more, and invest more.
So it’s worth ALL the effort to get out of debt as fast as possible.
Acknowledge That You Are In Debt
Recognizing your money troubles is the first step to a debt-free life.
This article shows 77% of American households have at least some sort of debt.
Financial problems are not easy to face and admit. That’s why many people would rather bury their heads in the sand than learn to fix their debt quickly and effectively.
If you are reading this post, you are not one of them, as you are actively looking for ways to get rid of debt fast.
Find Out The Details Of Your Debt
After being mentally prepared for your debt payoff journey, you need to know what you owe.
First, write a list of all your debts. Here are the common types of debt.
- Credit card debt
- Auto loan
- Business debt
- Personal loan
- Student loan
- Medical debt
Then find out the following information about your debts.
- The amount remaining of each debt
- The interest rate
- The minimum monthly payment
- The due date for each payment
- Length of payments
- The history of your payments
- The terms and conditions of your debt
- Information on the creditor (name, address, and contact number)
It might be tough to see all the money troubles, psychologically speaking. But having a clear understanding of where you stand is essential before moving on to the next tip.
Make A Getting Out Of Debt Plan
Once you have gathered all the information about your debt, it’s time to make an easy-to-follow debt reduction plan.
Here you will learn two popular strategies (the snowball method and the avalanche method) to help you claw your way out of debt.
What Is The Debt Snowball Method?
The snowball method was popularized byDave Ramsey.
It starts with paying off the smallest debt balance as much as possible and working your way up to the largest debt.
In the meantime, you will pay the minimum amount on other debts.
Once you pay off the smallest debt, you will work on the next smallest debt, and so on until you have eliminated all your debts – snowballing.
Having lots of debt with a crapload of interest could be overwhelming.
According to researchers for the Harvard Business Review, the debt snowball method seemed to be the most productive strategy because of the motivational factors we humans need.
The obvious benefit of the snowball method is that you can have small wins along the way, which relieves some financial stress and keeps you motivated for your debt-free goal.
“Knock out a small debt first so you get a quick win. Momentum is key.” – Dave Ramsey
This method is a good option if you
- have limited income,
- want to decrease the number of creditors,
- and enjoy small victories.
However, you won’t save much money on interest fees.
What Is TheDebt Avalanche Method?
The avalanche method is a debt repayment technique that involves paying off the debt with the highest interest rate as much as possible first while making the minimum payment on the others.
Once the highest-interest debt is paid off, you will move to the next highest interest rate. Then repeat the process until you dig yourself out of debt completely.
The debt avalanche method is worth trying if you aim to
- have more financial wiggle room,
- free yourself from high-interest loan payments,
- reduce the overall interest rate,
- and wipe out your debt faster.
Whichever debt payoff method you choose is your personal preference.
Don’t Accumulate More Debt
While you are trying to get out of debt fast, don’t borrow more money for unnecessary purchases.
That means no more consumer debt or personal loans.
Only use the money you have instead of the future money you wish you had.
That’s why it’s also essential to build an emergency fund while paying down your debt. It’s a plus if you open a high-yield savings account.
Imagine if you have an unexpected job loss or need an urgent doctor visit, an emergency fund can give you fast access to cashfor unplanned expenses without taking on more debt.
Why An Emergency Fund Is Part Of A Debt Elimination Program
Should You Pay Off Debt Or Save Money First?
Reasons You’re Bad With Money (And How To Fix Them)
Cut Up Your Credit Cards
Debt is not a way of life if you want to achieve financial freedom. And the use of credit cards without discipline can keep you in the cycle of debt forever.
Trust me; you don’t need to learn this the hard way.
Cutting up your credit card(s) that squeeze(s) your happiness to avoid further temptation if you are struggling with overspending. That also includes erasing all your card information online and unsubscribing from retail websites in bulk.
Alternatively, you can use the envelope budgeting method when making purchases.
Since there is only limited physical cash in each envelope, you will stop spending when the cold, hard cash is gone.
Use Credit Cards Wisely
If some merchants don’t accept cash for payment, use your debit card before your credit card if possible.
Only use your credit card when you know you CAN pay off all your balances in full to prevent future debt.
If you fail to do so, you will end up paying more interest on top of your balances. And when this happens again in the following month, you will pay interest on your interest thanks to the power of compounding.
Also read: No-Spend Challenge: The Only Money Challenge You’ll Ever Need To Take
Negotiate Your Interest Rates On Your Debt
Did you know you can negotiate the interest rates with your credit card companies to speed up the time to pay off your debt?
Yes, you can.
Plus, you can also negotiate the minimum payment amount and payment plans.
There is a possibility of reducing your debt balances and making smaller monthly payments if you struggle to pay off your balances.
All you have to do is make a phone call and ask for a better term.
You should have a good shot if you are a long-term client with a good repayment history.
If negotiation is not your forte, do your research to increase your bargaining power.
Sometimes, you might need to talk to a senior manager to get it settled. You can also reach out to a nonprofit credit counselor for help.
Don’t forget to ask for a written agreement for the offer as proof.
Negotiate Other Bills
You can also negotiate other bills (e.g., utility bills, insurance premiums, phone plans, and internet fees).
It takes much more effort (money-wise) to acquire a new customer than to retain a current one. So don’t be afraid to ask.
And service providers usually have unadvertised specials for their sales team.
It’s worth asking as you have nothing to lose and extra dollars to gain.
Imagine how the freed-up dollars could help you dump debt more quickly.
Get A Balance Transfer Card With A 0% Introductory Interest Rate
A balance transfer lets you move your debt from one credit card to another. And a 0% introductory APR (annual percentage rate/interest rate) allows no interest for a limited amount of time, typically six to 21 months. Note that balance transfer fees might occur.
👉 Meaning: You can borrow money without accruing interest during the introductory no-interest period. Once the promotional period ends, you will need to pay interest again on any remaining balances.
You might be eligible for a 0% balance transfer credit card with a decent credit rating.
Remember, you still need to pay off the debt that you owe.
🌟 Pro Tip: This is a temporary solution to decrease the total interest charges.
It might give debtors a false impression that they have more money in their pocket because of no interest, which might postpone the debt-free mission.
If you want to climb out of that hole, use the extra dollars to pay down your debt and pay off your balance in full before the intro period ends.
Be Careful With Debt Consolidation
A debt consolidation loan is a type of personal loan that allows you to merge multiple debts (typically high-interest debts) into one loan (i.e., a debt consolidation loan).
In other words, you only have a single monthly payment to manage, which simplifies the repayment process.
It might be a good fit if you can
- get a lower interest rate,
- ensure the rate won’t increase before paying off your debt,
- and commit to paying off your debt without getting new debt.
By doing this, you can achieve debt freedom faster.
That said, debt consolidation doesn’t guarantee you a lower rate and may not be available on all types of loans.
On top of that, you might need to pay extra fees (e.g., balance transfer fees, annual fees, and closing costs). And if you miss a payment, additional charges might occur.
🌟 Pro Tip: Make sure you do your homework before considering debt consolidation. Talking to a certified credit counselor is also helpful and stay away from debt relief scams that could put you further into debt.
Pay More Than The Minimum Payments
It’s tempting to pay the minimum amount on your credit card balances every single month, but you will end up paying more than you should (unnecessary interest) for decades.
Paying (much, much) more than the monthly minimum can help you save on interests and pay your balances off faster.
So find ways (which we will talk more about later) to free up money to maximize payments.
Establish A Reasonable Monthly Budget
Having a detailed budget has many benefits, especially in your debt-free journey.
Here are a few advantages.
- Know your current financial situation (incomes, debts, and expenses) and track your daily spending.
Having a budget can help you assess your finances and stay on track. You might be surprised that a $5 coffee per day can cost you $1825 a year.
- Identify the bad money habits to break.
We are creatures of habit, and debt reflects our financial behavior. If you want to stay out of debt, break your old spending habits with the help of budgeting.
- Devise a debt payoff plan (with your life partner).
If you don’t know where you stand, it’s hard to make a plan to pay off your debt fast.
And if you are married and decide to tackle the debt problems with your spouse, budgeting can help reduce financial disputes as a couple.
- Reduce your spending.
You can know how much, where, and when you spend your money, so you can cut out the extras for good.
You will also learn to delay instant gratification and make better financial decisions.
- Develop a positive money mindset.
Budgeting can help you change how you manage your finances, pay off your debt faster, and spend money on the things that truly matter.
Is The 50/30/20 Budget Rule Good For You?
Which Payment Type Is Best If You’re Trying To Stick To A Budget?
Trim Your Expenses
If you want to get out of the vicious debt cycle completely, spend less than you earn.
When you have a budget in place, you should be able to spot areas to reduce your spending.
From small purchases like your daily takeaway coffee to big purchases like a new car, trim everything you can. So you can have more money left over to put toward debt.
A useful rule of thumb is to cut out the expenses (like cables, gifts, expensive hobbies, and travel) that are not needed for your day-to-day survival while you dig yourself out of the hole of debt.
That might mean a complete lifestyle change for big spenders. It’s NOT easy. I get you, but this is a temporary strategy until all your debt is behind you.
👉 Remember: The more you save, the faster you can get out of debt.
– Things I Stopped Buying To Keep My Finances In Order
Live Below Your Means To Get Out Of Debt Fast
Living paycheck to paycheck is one of the main reasons to keep you in the debt cycle.
On the other hand, living below your means could free you up some extra cash in your monthly budget and help you stay out of debt as fast as possible.
The core of frugal living is spending less than you earn and making wise financial decisions to have a quality life.
You can always start with the following tips to get your financial life back in order.
- Start meal planning
- Use coupons
- Shop sales
- Control impulse purchases with a shopping list
There are many ways to save money fast (even on a low income). And it’s possible to save hundreds of dollars a month and thousands of dollars a year and get out of debt more quickly.
– Why Saving Is Crucial For You To Get Out Of Debt
– Cool Piggy Banks That Will Inspire You To Save More
– How To Save $5,050 In 100 Days
Use The Found Money To Pay Down Balances
Found money could be your year-end bonus at work, a big tax refund, or an inheritance.
When you receive the extra cash, use it to pay off your debt so you can have more breathing room in your financial life.
Grow Your Money To Pay Off Debt Fast
Bringing in extra money is a surefire way to ease your debt burden.
If you earn more and spend less, getting out of debt is just a matter of time.
One quick way to get extra cash is to sell all your used and unwanted stuff (like electronics, furniture, and clothes). You can hold a yard sale or sell online (e.g., Facebook market and craigslist).
Another quick way to earn extra cash is by taking simple surveys. You can use survey sites like Survey Junkie.Earn cash or FREE gift cards (your choice). It’s 100% FREE to join and easy to use.
In the meantime, monetizing your skill to become a freelancer on the side is a great option. You can create a gig on Fiverr and Upwork.
Also read: How To Make $50 A Day Fast
If you want to get your money to work hard for you, try these ideas tomake additional income from the comfort of your home. So there is no excuse.
- Create a profitable blog
- Start affiliate marketing
- Design digital products using Canva
- Create online courses with Teachable
FAQ – How To Get Out Of Debt Fast
Should I Save Money Or Pay Off Debt?
You can start building a sizable emergency fund before using all the money to pay off your debt.
An emergency fund could help you stop depending on a credit card when something goes wrong.
So you don’t have to accumulate more debt while trying to get rid of the existing ones.
Besides, the interest rate of your debt might be much higher than the interest in your savings account.
Should I Pay Off Debt With My Savings?
When you have an emergency fund in place (at least $1,000 or three months’ worth of expenses), you can use the rest of your savings to ditch debt faster and avoid paying high-interest charges in the long run.
You might fall behind on your savings goals before getting rid of debt. But drowning in debt payments won’t help you save money down the road.
How Do I Get Out Of Debt With No Money?
One big challenge for people to pay off debt is the additional high-interest rate.
If you wonder how to get out of debt with no money, consider applying for a 0% balance transfer credit card.
So you can get rid of debt without paying interest for a certain period (typically six months to 21 months).
That means you need to pay off your debt in a fixed timeframe to avoid additional (high) interest.
How Can I Pay Off Debt If I’m Broke?
Try these tips if you want to pay off debt when you’re broke.
- Create a budget
- Cut out all discretionary expenses
- Make a debt payoff plan
- Find ways to increase your income
- Ask for a lower interest rate
- Pay on time to avoid late fine
- Think of your money goals to stay motivated
- Be patient and persistent
Also read: Money Affirmations That Will Change Your Financial Destiny
What Is The Easiest Way To Get Out Of Debt?
The easiest way to get out of debt is to get a balance transfer card with a 0% introductory interest rate and commit to paying it off within the grace period if you are eligible.
And pay much more than the monthly minimum if you want to get rid of debt faster.
Don’t Give Up
Getting out of debt fast doesn’t happen overnight, and sometimes you can get demotivated with large amounts of debts.
Don’t give up. Period.
If you need a bit of motivation and inspiration to work toward debt-free living, check out these two books. Free free to read as many times as you want.
- Your Money Or Your Life: 9 Steps To Transforming Your Relationship With Money And Achieving Financial Independence by Vicki Robin
As Dave Ramsey says, “I believe that through knowledge and discipline, financial peace is possible for all of us.”
And I believe you can do this!
I sincerely hope these tips can help you get back on the right track in your debt payoff journey.
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