3 Proven Strategies for Paying Off Debt Faster

If you are searching for ways to pay off debt the fastest – you are in the right place. These three debt repayment strategies are designed to hasten the repayment process, as well as save your money on interest. Try one of these three strategies to pay off your debt faster.

1) Consolidation

2) Refinance

3) Snowball method

Consolidating Debt

If you are trying to pay down too many different debts, it may make your repayment process easier to consolidate all of the debt into one loan. That way you only have to remember one payment each month. Plus, if you find a new loan with a lower interest rate, you could save money too! Popular tools you can use to consolidate debt include:

  • Credit card balance transfers
  • Personal (also known as Signature) loans
  • Federal and private student loan consolidation
  • Home equity loans

How it speeds up debt repayment:

If you only have to focus on one payment rather than 10 each month, your budget will become easier to manage. Plus, opening up a new loan to pay off all of your existing balances can actually turn out to be a smaller monthly payment! If the interest rate is lower, you will also end up paying less back overall.

Refinancing Debt

If you don’t want to open up a new loan to consolidate your debt, you can refinance your current loan at a lower interest rate. You can qualify for a lower interest rate if your credit score has improved, all interest rates have dropped, or you now make more money.

How it speeds up debt repayment:

When the interest rate lowers, your monthly payment lowers. If you choose to keep paying the same amount, you can actually pay of the loan faster than the original timeline!

Here’s an example.

You bought a new car through the dealership for $25,000 at a 7% interest rate and 60-month loan period. You’ve been making monthly payments of $495.03 for 12 months before you decide to refinance.

If you refinance at a 2.49% interest rate, your monthly minimum payment would drop to $444.72. If you continued to pay $495.03 on the remaining $20,298.11 balance, you could pay off the loan five months earlier than the estimated 48-month timeline.

Snowballing Repayment

This repayment strategy focuses on paying off debt with the lowest balance first, rather than paying off debt with the highest interest rate first. Here’s a simple breakdown of the method.

  • Pay the minimum amount to all creditors except the debt with the lowest balance.
  • Put the extra money you have from paying only the minimum on all the other bills towards the smallest debt.
  • Once you’ve paid off the smallest debt, roll over those funds to the debt with the next highest balance.
  • Keep snowballing your payments until you pay off your entire debt!

How it speeds up debt repayment:

The method was popularized by Dave Ramsey and shows success by appealing to human psychology. It gives you small victories fast with can motivate you to continue with your repayment plan. If you get excited about eliminating some of your debt quickly, you can pay off your overall debt faster by sticking to this plan.

You can use our FREE debt snowball calculator here.

What are your goals for eliminating debt?

Why do you want to pay off your debt faster? Are you saving up for a particular purchase – like a home? Or do you have a different goal in mind? No matter what your motivation, there’s more to eliminating debt than these three strategies. It’s about confronting the underlying causes of your debt, as well as your behavior and lifestyle contributions.

If you’re serious about paying off debt, you should read our comprehensive guide.