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9 Strategies You Can Use To Pay Off Debt

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In a Nutshell

We all want to get rid of our debts, but paying them off soon isn’t a practical option for many of us. Having a solid strategy can help you make progress with your debts and regain control of your finances. But some strategies work better for some types of debt than others. Here are nine strategies you can use to get started with paying down your debt faster.

Written by Curtis Lee, JD
Updated August 16, 2021

We all want to get rid of our debts, but paying them off soon isn’t a practical option for many of us. Depending on the type of debt you have, there are strategies you can use to pay off your debts faster and/or save money on the interest.

These strategies are ideal for small to moderately sized debts, many of which will have high interest rates. These include personal loans, credit cards, auto loans, and student loans. For larger debts, such as high medical bills or a home mortgage, these strategies can help. But it will take a long time to see the positive results. There may also be other debt-relief options to consider using instead.

1. If You’re Not Using a Budget Already, Start Now. 

Before you can create a plan to pay off debt and become debt-free, you need to create a budget. A budget allows you to better understand how you’re currently spending your money. It also helps you identify what changes you can make to have more money to use toward debt payments.

There are several ways to create a budget. The most common is the traditional budget. It’s what you’re probably thinking of when you imagine a budget. A traditional budget consists of identifying your expenses and your income, then comparing the two. The goal is for your income to be higher than your expenses. If it’s not, then you’ll need to figure out ways to reduce your expenses and/or increase your income. Even if your income already exceeds your expenses, you can still find ways to make this difference as large as possible.

Another popular budgeting method is the 80/20 budget. For every dollar you bring in as income, you save 20% and spend the rest. You can adjust these numbers any way you want to increase or decrease the amount of money you put into your savings account. 

When you create your budget, there are a few pointers to keep in mind. First, you’ll need to organize it in a way that makes sense to you and is easy for you to understand and track over time. Most people create some sort of visual aid that can organize their spending and income. A good example is a spreadsheet, although there are other methods available, such as budgeting apps.

Second, you want to establish goals for your budget. These can include short-term, medium-term, and long-term goals. Having goals is important because they remind you why you’re budgeting and what the extra money you’re allocating will be used for.

Finally, don’t be afraid to adjust your budget. As your income and expenses change, make tweaks to your budget as necessary. You can also change your budget as you reach certain financial goals or milestones.

2. Avoid Incurring New Credit Card Debt.

Avoiding credit card debt is important because of high interest rates. It’s one thing to spend $100. It’s another to spend $100, then pay interest on that purchase. Interest charges are one reason it’s so difficult to get out of debt. Of the various types of consumer debts, credit card interest rates are some of the highest you’ll find.

You don’t need to stop using credit cards. They can be convenient, especially when you don’t carry around cash. They also offer fraud protection, especially for online purchases. Many credit cards also offer rewards on things you need to pay for, such as a utility bill or basic groceries. But if you use a credit card, you want to make sure you can pay it off each month within the grace period. Most cards offer a grace period of 20–25 days during which interest on new charges doesn’t accrue. Paying off the card before the grace period ends helps you avoid interest payments as well as late fees.

3. Pay More Than Minimum Monthly Payments.

Lenders, especially credit card companies, love it when borrowers make minimum payments. If you just pay the minimum each month it takes more time to pay off the debt. And the longer it takes you to pay off a debt balance, the more you’ll pay in interest.

Paying the minimum monthly payment can be tempting because it’s much smaller than the actual debt. Sometimes a minimum payment will be as small as 1% or 2% of the debt balance. But if you add even a little extra money on top of the minimum payment, you can reduce the time it takes to pay off the debt. This could lead to significant savings because you can avoid spending extra money on interest. 

For example, imagine you have a credit card with an interest rate of 16.90% and a balance of $2,637.50. Let’s also assume that you never use that credit card again to make another purchase until the balance gets paid off. If you only make minimum payments of about 1% of the remaining balance—$26 a month— it’ll take you roughly 13 years to pay off your credit card. Over that time span, you’ll spend about $5,545.00 to pay off the original debt. But if you make a monthly payment of $94.00 then you can pay off the entire balance in about three years for a total cost of approximately $3,381. 

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4. Use the Debt Snowball Method.

To use the debt snowball method, you must first identify all your debts, then list them from smallest to largest by balance. Next, identify your debt with the smallest balance and pay as much as you can on it each month until it’s paid off. During this times, only make the minimum payments on your other debts. After you pay off the debt with the smallest balance, repeat the process with your next-smallest debt.

The biggest advantage of the debt snowball method is that you can see positive progress quickly. This can help you maintain your motivation to become debt-free. The primary disadvantage of the debt snowball method is that it can be more expensive over time than other methods. That’s because you pay off your debts in the order of their balance, regardless of their interest rate. Additionally, it may take longer to pay off all your debts using the debt snowball method as opposed to the debt avalanche method.

5. Use the Debt Avalanche Method.

The debt avalanche method is similar to the debt snowball method, with one major difference. Instead of putting all of your available funds toward your smallest debt (and making minimum payments on all the rest), you use your extra money to pay off the debt with the highest interest rate. After that’s paid off, you focus on whatever remaining debt has the highest interest rate.

The debt avalanche method is ideal if you want to save as much money on interest as possible when paying off your debts. It’ll also often reduce the total amount of time needed to become debt-free compared to using the debt snowball method. But a disadvantage of using the debt avalanche method is that it may take longer to pay off your first debt. This can make it more difficult to stay motivated. And when it comes to a plan for paying off debt, your motivation and discipline are as important as your personal finances.

6. Save Money by Reducing Your Expenses.

If you want to make progress in paying off your personal loans or other forms of debt, it helps to have more money. Besides earning more income, the most effective way to get more money to use to pay off your debt is to cut back on your expenses. Below is a list of a few basic ways to start doing just that.

  • Reduce your energy usage. Turning off lights in unused rooms, adjusting your thermostat, and improving the energy efficiency of your home can make a difference in your monthly energy bill.

  • Review your mobile phone bill. See if another mobile phone service provider has a plan that still offers the minutes, texts, and data you need at a lower cost.

  • Adjust your subscription entertainment services. See if you use your Netflix or cable subscriptions enough to justify the recurring monthly cost.

  • Look for new insurance. Shop around for some car or home/renter’s insurance quotes. This might be a quick way to save a few hundred dollars each year. If you don’t want to switch, consider adjusting your coverages, such as raising your deductible.

  • Examine habitual spending. Do you always stop by a coffee shop for a cup of coffee before work? Or maybe you order food for delivery several times a week? If you’re willing to make your own cup of coffee a few times a week or cook at home an extra night each week, that could add up as much as $50 a month in savings.

After you’ve identified ways to cut back on your spending, you should use that money toward your monthly debt repayments.

7. Sell Unused and Unwanted Items to Make Extra Money.

Look around your home and see if there are any items that you don’t use or no longer want. If some of these are valuable, you can sell them for some extra cash. Ways to sell them include:

  • eBay

  • Craigslist 

  • Facebook Marketplace

  • OfferUp

  • Local consignment shops

  • Mercari

  • Poshmark

  • ThredUP

  • A yardsale

8. Use Debt Consolidation

Debt consolidation is the process of using a single loan to pay off two or more debts. In other words, you’re consolidating multiple debts into a single obligation. Besides reducing the number of bills you need to pay each month, debt consolidation should make your monthly debt payments more manageable. These lower payments may be the result of lower interest rates, but they can also come from extending the term of your debt. There are several ways to consolidate your debt, but they each have their potential pitfalls.

If you take out a personal loan, beware of high interest rates. Depending on your credit score, a personal loan could cost you more money in the long run compared to other debt consolidation methods.

Balance transfer credit cards are among the most common forms of debt consolidation loans. One reason is that many credit card companies will offer zero-interest introductory credit cards that allow customers to transfer existing credit card balances that are accruing interest onto a new card with no interest. But there are two things to be aware of. 

First, there’s going to be a balance transfer fee, which is often around 3%–5% of the total amount you’re transferring. Second, the 0% interest will eventually end. The 0% interest often ends around six, 12, or 18 months after you complete the balance transfer. That’s when you’ll start paying interest on whatever balance remains on the credit card after the introductory zero-interest promotion ends. So before completing a balance transfer, make sure you can pay off everything (or most of the amount) before the interest starts to kick in. 

Another common form of debt consolidation is a home equity loan or line of credit (HELOC). This can be an excellent option because interest rates are often low, especially if you have a good credit score. But that’s because the loan is secured by your home. This means if you default on your home equity loan, you could place your home at risk of foreclosure.

9. Celebrate Reaching Small Financial Goals.

Paying off debt is as much a psychological task as it is a financial one. To avoid getting burned out or discouraged during the debt repayment process, don’t forget to reward yourself after reaching certain milestones and goals. For instance, after you pay off your first debt, treat yourself to something nice. Maybe it’s a nice dinner out or buying that item you’ve been eyeing for the past few months. Whatever the reward, it’s important to celebrate your victories, even the small ones. This’ll help keep you on track and upbeat about continuing the difficult process of making debt repayments.

Let’s Summarize...

There’s nothing inherently wrong or shameful about having debt. According to the Pew Charitable Trusts, approximately 80% of Americans have some form of debt. Sometimes, this debt can become burdensome and interfere with other aspects of your life. Determination, discipline, and patience, plus having a solid strategy can help you make progress with your debts and regain control of your finances.

If the above-discussed debt payoff strategies don’t work or apply to your situation, you have other options. These include credit counseling, bankruptcy, or a debt management plan.

Written By:

Curtis Lee, JD


Curtis Lee is a writer and co-owner at Marvel Hill Freelance. Curtis earned his Bachelor of Science in Business from Wake Forest University and his Juris Doctor (JD) from Villanova University School of Law. After graduating law school, Curtis had the honor of clerking for a stat... read more about Curtis Lee, JD

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