No one likes to be in debt, and yet many of us have lived in it for years. If you’re wrestling with car loans, student loans, mortgages, and credit cards, it can feel like there’s no way out. But don’t worry—there is a light at the end of the tunnel. The first step to getting out of debt is to tackle it head-on with a solid strategy.
4 Steps to Pay Off Debt Fast
Now that you have a rough idea on how quickly you’ll be debt-free, here are 4 additional things you can do to pay off your debt even faster:
(If you haven’t already, I highly recommend you check out my post on finding out all your debts. Remember to make note of your balances, interest rates, required minimum payments, and monthly due dates)
1. Pay off the highest-interest loan first
To get out of debt as quickly and efficiently as possible, you’re going to want to pay off the loan with the highest interest rate first.
For example, let’s say Credit Card A has a balance of $1,000 and a 12% interest rate, and Credit Card B has $1,500 at 6% interest. You put down $150 total every month, paying the minimum payment (3%) on one and whatever’s left on the other. You’re going to save more money over time by eliminating Credit Card A first ($147 in total interest) vs Card B ($188).
The key part of this debt avalanche method is to pay more than the minimum payment towards your target debt each month. Just like with paying off student loans, you can actually save thousands of dollars on credit card debt each year by paying down your debt more each month.
Let’s say you have a $10,000 student loan, at a 6.8% interest rate, and a 10-year repayment period.
If you go with the standard monthly payment, you’ll pay around $115/month. Slowly but surely, paying the minimum digs you into a bigger hole. Even $20 more per month can save you huge amounts of money.
2. Use the debt snowball method
Want an alternative way to clear your debt fast? The debt snowball method is another simple way to chip away at your debts. Rather than the biggest interest rate, you focus on your smallest debt.
With this method, too, you make only the minimum payments on your other debts. Any extra money you can pay, chuck it all onto your smallest debt. Clear that one as fast as you can.
Then celebrate! You just cleared one debt.
Any money you were using to pay that debt is now freed up. You can now move on to the second smallest debt and pay more into that, clearing it faster.
Keep working this way, and you’ll gain momentum every time a debt is cleared. By the time you come to your final and biggest debt, you’ll be able to pay off more and more because you don’t have other debts holding you back.
The great thing about this method is that it really helps you feel like you’re making progress (because you are). Each debt you clear is another weight off your shoulders.
3. Negotiate your interest rate
Can’t afford to make larger payments? Want to add a one-two punch to your debt payoff strategy? Consider negotiating a lower interest rate with your lender.
Not many people realize this, but you can actually save over $1,000 in interest with a single five-minute phone call.
It can be crazy simple too — in fact, here’s a word-for-word script that many of our readers have used already to lower their interest rates:
YOU: “Hi, I’m going to be paying off my credit card debt more aggressively beginning next week, and I’d like to lower my credit card’s interest rate.”
CC REP: “Uh, why?”
YOU: “I’ve decided to be more aggressive about paying off my debt, and that’s why I’d like to lower the interest rate I’m paying. Other cards are offering me rates at half what you’re offering. Can you lower my rate by 50% or only 40%?”
CC REP: “Hmmm … After reviewing your account, I’m afraid we can’t offer you a lower interest rate.”
YOU: “As I mentioned before, other credit cards are offering me zero percent introductory rates for 12 months, as well as APRs that are half what you’re offering. I’ve been a customer for XX years and I’d prefer not to switch my balance over to a lower-interest card. Can you match the other credit card rates, or can you at least go any lower?”
CC REP: “I see … Hmm, let me pull something up here. Fortunately, the system is suddenly letting me offer you a reduced APR. That is effective immediately.”
It’s really that simple to save money in five minutes.
Make the call, and if you’re successful, do two things:
- Celebrate your accomplishment (this is a big deal).
- Make sure to adjust your debt chart from step one. You get to chop that big ugly interest rate down and lower your monthly payments.
Repeat this process for any other cards or debts you can to shave off a chunk of your debt.
4. Create a conscious spending plan to avoid further debt
Paying off your debt is a huge win, but it’s just the beginning. The real challenge? Staying out of debt for good. Sadly, a lot of people work hard to clear their debts, only to end up right back where they started because they never changed their spending habits.
That’s where a Conscious Spending Plan comes in. Think of it as a smarter way to manage your money–one that lets you spend on the things you love while cutting back on the stuff that doesn’t really matter. It’s all about being intentional with your money, so you can enjoy life without the constant worry of falling back into debt.
Want to dive deeper into how to create your own Conscious Spending Plan? Check it out here.
Mistakes to Avoid When Paying Off Debt
Want to clear debt and stay out of it? Make sure you avoid these common mistakes:
1. Keeping the same old habits
If your spending plan involves credit cards, payday loans, or relying on credit…you guessed it. That needs to stop. You can’t stick with the same old habits because it’ll be so much harder to dig yourself out of debt.
Take Jennifer & Andrew, for example—despite having $4,600 in credit card debt, they were spending hundreds of dollars on food delivery and other non-essential spending when they could be using that money to pay off their debt quicker.
Ramit: [00:42:26] Listen, if you have credit card debt, you need to consider that an absolute emergency, a red flag, because if you truly understood the effects of 28% interest rates, you would never let yourself get into that quicksand. Once you get in, it’s very, very difficult to get out.
With credit card debt, it’s an emergency, and an emergency means it’s time to make radical changes, but too few of us recognize that emergency. We get used to paying it, finally, we simply tell ourselves, oh, this is the way it always is. We’re always going to be stuck with credit card debt. No, that’s not the way to do it. You can’t accept that. So I’m begging you to treat it like an emergency and start making radical changes.
No, it’s not. Spending hundreds of dollars on cable and takeout makes no sense to me if you have crippling credit card debt.
As we continue to talk, we see how they slowly realize how dire their situation is and are beginning to take small steps forward:
Ramit: [00:53:29] So you told me that you were going to cut back how much on eating out?
Andrew: [00:53:40] I would say half.
Ramit: [00:53:42] Half. So you’re going to save 300 a month there?
Andrew: [00:53:45] Yeah.
Ramit: [00:53:46] Okay, good. That’s 300 there. Plus, you’re going to save how much on your subscriptions?
Andrew: [00:53:45] That was 45, I think.
Ramit: [00:53:56] Yeah. Let’s say 50. Let’s say 45. Forty five, and then, uh, there was how much for the groceries you’re going to save?
Andrew: [00:54:03] A 100.
Jennifer: [00:54:04] I think we said 200 because is 50 a week.
Ramit: [00:54:06] Yeah, 200. That’s, uh, 2, 3, $545. Where else is the rest coming from? How do you cut 800 a month off your guilt-free spending? Andrew’s face just– his eyes went wide. But the factis–
Andrew: [00:54:26] Well, I’m trying to think.
Ramit: [00:54:27] Gosh, if you got that to 1200, I’m just going to tell you, you would have over a $1,000 a month extra money. Is that mind blowing to anybody here?
Andrew: [00:54:39] That would be fantastic.
Jennifer: [00:54:40] It is. I’m literally writing down a little note. Yeah.
Ramit: [00:54:43] You’ll be amazed. Okay, great. And by the way, what are you going to do with all this extra money now? So let’s just pretend it’s 800 bucks a month extra. It’s probably more if you really get dialed in, but let’s say it’s 800. How you going to split it?
Jennifer: [00:54:57] So do we do it by percent, or do we just put everything into one pot, or how are you– now that we’ve said all this stuff, how are you thinking about this?
Andrew: [00:55:09] I would like to drop our debt first and get as close to debt-free as we could be. So I would put the majority of it. In my head it’s save 200 to $150 for guilt-free, the other 600 to 750, car, credit cards, SBA loan. And we can just tick those up on top of what we’re already paying because it’ll drop it faster, and then in the long-run we’ll be saving more money.
Jennifer: [00:55:35] So just make a plan to go hard on the debt.
When you’re in debt, how you manage your money needs to change. Having a debt repayment strategy will put you on the right track, but beyond that, you’ll also need a practical budget and a sustainable spending plan. Changing habits is never easy and there will be an adjustment period, but it’s worth it to be free from debt.
2. Not asking for help
Many people attempt to tackle their debt management alone, perhaps due to a sense of personal responsibility or embarrassment. However, this approach often does more harm than good.
Christina and Noah were fearful and embarrassed by their financial decisions, too. They wondered whether they were the only ones managing their money this way:
[00:05:36] Do I need someone to check me and be like, you’re overspending. You think you have this kind of money, but if you take the amount you make and the amount we make and then you deduct how much it costs to live and taxes in a high cost living area, can you really afford this? When your friend says let’s go to dinner and let’s spend 70 dollars, is that cool, or is that too much money? Because then we’re also spending money in other areas. And I have a beautiful spreadsheet that you probably would hate. Too many line items in my Excel spreadsheet.
[00:06:08] Ramit: How many line items? Just tell us. You know you’re proud of it. Come on. It’s on your phone, probably on a shortcut. How many line items?
[00:06:15] Christina: It’s probably 30 to 40.
[00:06:17] Ramit: Noah?
[00:06:19] Noah: I want to know if my understanding of our finances is oddly skewed towards just not spending money and if that’s more detrimental, or if we can actually afford the life that we’re trying to build right now.
[00:06:35] Christina: And what if we have an off year? We’re only in our 30s. So what if we have some off years in our 30s or 40s? And what if we have an off year in our 50s? Or what if for some reason either of us don’t get to work till 68 years old and then all of a sudden I get laid off at 62 and I can’t get a new job? And then that retirement number is, I’m starting at 62 and not at 68.
[00:06:56] So those are bigger things that I process often that the fear keeps me going. I need to be successful enough that I have a job at 50. I have a job at 60. I’m crushing it. He’s crushing it. And there’s a lack of fear involved.
[00:07:14] Ramit: Is fear your motivator?
[00:07:16] Christina: Yes. Because I’m the driver, I feel like. I feel like I’m off in the driver’s seat.
[00:07:19] Ramit: Oh, okay. You’re the driver. That’s your role.
[00:07:22] Christina: I think. I think he would agree.
[00:07:24] Ramit: And if you’re the driver, what is he?
[00:07:26] Christina: He’s the passenger.
[00:07:28] Ramit: Fair, Noah?
[00:07:29] Noah: Yeah, the wheels. I don’t know.
[00:07:31] Christina: He’s in the car.
[00:07:33] Ramit: If you’re deciding to take the metaphor at its face value, why are we here? Because shouldn’t the driver decide where you’re going to go?
[00:07:41] Christina: I mentally wonder though, like, am I making bad decisions? Is this normal? Is everyone spending this much money of their income in their paycheck? It feels heavy. It feels like we’re spending too much. And maybe other people are cool with that and just overspending their budget and not saving and investing a ton, but it feels like we’re doing something wrong.
If you have unmanageable debt, one of your first calls should be to your banks or lenders to try and reduce that interest rate. This is a simple way to get help and if they say yes, you’re one step ahead than you were.
Another way you can get help is to call a credit counseling service and get some advice. Credit counselors are trained to offer debt management programs and advice that can make all the difference. They can also help you set up a budget to avoid future debt.
3. Making only the minimum payments
Making only the minimum payments on all your debts is one of the most common credit card mistakes out there. The truth is, you’re actually paying more by avoiding those higher payments each month. All it does is prolong the debt and increase the amount of interest you need to pay.
Amy and Tori faced this very problem and discovered they’ll be in their 70s by the time they finally become debt free:
Ramit: [01:02:50] All right. Have you ever calculated how long that’s going to take to pay it off?
Amy: [01:02:56] I think I saw something sickening like 15 years or something crazy.
Ramit: [01:03:01] 15 years. Yeah, that’s crazy. Let’s look it up. It will take you 530. That’s so many months. I have to pull out a calculator. 534 months divided by 12. Amy, read the rest of this.
Amy: [01:03:12] With a minimum payment, it will take you 534 months to be rid of your debt. In that time, you’ll pay 124,319 and 7 cents in interest.
Ramit: [01:03:25] 534 months is how many years, Amy?
Amy: [01:03:29] 44.
Ramit: [01:03:35] So how old will both of you be in 44 years when you’re finally debt free?
Amy: [01:03:40] 72.
Ramit: [01:03:43] Wow.
Tori: [01:03:46] And I’ll be 71.
Ramit: [01:03:46] Happy retirements.
Try to make more than the minimum payments on at least one of your debts. You could save so much over the course of your loan in interest alone!
…but you don’t have to take the same path as everyone else. How would it look if you designed a Rich Life on your own terms? Take our quiz and find out:
Should You Consolidate Your Debt?
At some point, you’ve probably considered consolidating your debt. There are a few benefits to this:
- It makes managing all your debts simpler
- You can save on interest
If you have several credit cards or personal loans with high-interest rates, it can make sense to take out new finance, pay off all your debts and leave yourself with just one debt to manage.
But there are two key things to remember.
Consolidating your debt is only worth it if you can save money on interest. Moving to a loan with higher interest rates is going to leave you in a worse position, even if it makes managing it simpler.
Also remember, taking out more finance doesn’t mean you can now spend more. Don’t make the same mistake some people do when they take out a brand new loan, pay off debts and then dump another big purchase on a credit card.
Debt consolidation loans are yet another debt, remember. It’s not a ticket out of debt unless you’re serious about clearing it and staying out of debt.
Wrapping Up
A life of debt doesn’t have to be your reality. If it always feels like you’re clawing your way through debt, there is a light at the end of the tunnel.
But don’t do what so many people do and try to ignore debt. The fastest way to get rid of it is to face it head-on, come up with a strategy to pay it off, and have a budget to avoid it in the future.
It’s one of the best things I’ve published (and 100% free), just tell me where to send it:
