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.
Wells Fargo Online — Bill Pay
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 most expensive loan first.
How can I accelerate my debt payoff? ›
7 ways to pay off debt fast
- Pay more than the minimum payment every month. ...
- Tackle high-interest debts with the avalanche method. ...
- Set up a payment plan. ...
- Put extra money toward paying off your debts. ...
- Start a side hustle. ...
- Limit unnecessary spending. ...
- Don't let your debt hit collections.
If you're looking for practical ideas on how to get out of debt, consider the following tips.
- Create a budget plan. ...
- Pay more than your minimum balance. ...
- Pay in cash rather than by credit card. ...
- Sell unwanted items and cancel subscriptions. ...
- Remove your credit card information from online stores.
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.
The "snowball method," simply put, means paying off the smallest of all your loans as quickly as possible. Once that debt is paid, you take the money you were putting toward that payment and roll it onto the next-smallest debt owed. Ideally, this process would continue until all accounts are paid off.
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 get out of $30,000 credit card debt? ›
How to Get Rid of $30k in Credit Card Debt
- Make a list of all your credit card debts.
- Make a budget.
- Create a strategy to pay down debt.
- Pay more than your minimum payment whenever possible.
- Set goals and timeline for repayment.
- Consolidate your debt.
- Implement a debt management plan.
Tips for How to Get Out of Debt Fast
- Lower your expenses. Once you've made your budget, go through it line by line and see where you can cut back on your spending. ...
- Increase your income. Think of your income as a shovel. ...
- Cut up your credit cards. ...
- Know your why. ...
- Take Financial Peace University.
While there are no government debt relief grants, there is free money to pay other bills, which should lead to paying off debt because it frees up funds. The biggest grant the government offers may be housing vouchers for those who qualify.
Who can help me clear my debt? ›
The debt management company administers all payments to your creditors. You just make one monthly payment to the debt management company. They should pass your payments on within five working days. The debt management company should review your plan with you every year and give your creditors regular updates.
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.
The Department proposes two rules to address this issue through automatic relief. One would permit automatic relief of up to $20,000 of the amount by which a borrower's loans currently exceed what they owed upon starting repayment.
How do I get out of insane debt? ›
6 ways to get out of debt
- Pay more than the minimum payment. Go through your budget and decide how much extra you can put toward your debt. ...
- Try the debt snowball. ...
- Refinance debt. ...
- Commit windfalls to debt. ...
- Settle for less than you owe. ...
- Re-examine your budget. ...
- Debt-to-income ratio. ...
- Interest rates.
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.
Make debt payments beyond the minimum.
Making more than your required minimum payment can help you pay off debts more quickly and save money in interest charges. Earmark unanticipated funds, such as your tax return or a bonus, for debt payments.
What program helps someone pay off debt faster? ›
Debt consolidation programs: Under these programs, debt relief experts use your financial data to negotiate better terms with your lenders and create payment plans to help you pay your debts off faster.
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.
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.
Credit card refinancing can help you pay off $5,000 in credit card debt much faster because a personal loan comes with a predetermined end date. Debt consolidation loans allow you to combine multiple debts into one loan. Some lenders will even send your loan funds directly to your former creditors.
