How to Pay Off Debt Fast

Disclosure: This page contains affiliate links, meaning I receive a commission if you decide to make a purchase through my links, at no additional cost to you. Please read my disclosure for more info.

pay off debt fast If you hate having to deal with the paying your loans every month, then it’s probably time you take care of them once and for all. If you’re not sure where to start, here’s how to pay off debt fast.
I’ll go through the different steps in helping you figure out how much debt you have, which one you should pay off first and an effective strategy you can follow to finally get rid of your debt.
This way, you’ll be able to enjoy and live a debt-free life.

Related Posts


What is Considered Debt?

Before you get to paring down debt, it’s important to understand what is and what isn’t considered debt.

So, in simple terms, debt is anything you owe to someone else. This can be a favor, material things or money.

Financially, debt is some form of money you owe other people.. In other words, you’ll need to pay them back. In most cases, you’ll need to compensate them for the time they’ve had to part with their money. That’s because it is opportunity lost for them, meaning they can’t invest it or make that work for them while you haven’t paid it back.

This is why you get charged an interest rate when you borrow money. The interest pays for that “time”.

The most common types of debt you may have include:

  • Student loans
  • Credit card debt
  • Car loans
  • Personal loans
  • Medical debt
  • Home equity loans
  • Payday loans
  • Government debt or IRS debt

The largest debt you’ll likely be paying in your lifetime would be for your home. That is, your mortgage. But, I didn’t include it in the list above because it isn’t as “risky” as the others.

This is why you don’t hear financial gurus like Dave Ramsey or Suze Orman telling you to pay off your mortgage in a hurry. In contrast, you’ll hear them constantly tell you to pay off your credit card debt and student loans when you have extra cash to do so.

Mortgages are meant to be long-term. This can be anywhere from 15 to 30 years in many cases. And, as long as you don’t have a mortgage that’s way over your head, ie. something that takes up over 25% of your monthly take home pay, it’s not a problem.

Mortgages comes with fixed interest rates and long term payment plans. This means you can deal with them over time.

What’s Not Considered Debt?

Many of your recurring expenses aren’t considered debt. You pay for them monthly or on a regular basis. But, they are charges or expenses as opposed to debt.

That’s because you can technically stop them whenever you want. With debt, you can’t stop paying without facing any consequences.

Of course, just because you can stop paying some of these things doesn’t mean it’s practical to do so.

Here are some of the things you pay for regularly that aren’t considered debt.

  • Rent
  • Electric and water bills
  • Utilities
  • Insurance
  • Taxes
  • Subscriptions
  • Childcare payments
  • Groceries

That said, it’s important to note that these things can turn into debt. When you pay for them using your credit card, in an indirect way, they become debt.

Why You Need to Get Out of Debt

There’s a very important reason why financial experts like Suze Orman always tell you to pay off debt as soon as you can. And, that is because debt will keep taking your money.

Let me say that again. The longer you hold any debt, the more money you’ll end up paying.

That’s because debt almost always comes with interest. This means in addition to the amount you borrowed, you’re paying extra for the interest.

What’s worse is that the interest keeps compounding. That means, over time, it keeps increasing because the current interest amount keeps getting added to your total balance.

Debt Takes More Than Just Money from You

While keeping debt around does cost you more money in the long run, it isn’t the only reason why you should get out of debt. That’s because the effects of owing someone has more far reaching effects.

It affects you mentally, psychologically and emotionally, it also puts a strain in your relationships. In fact, money is the number one reason marriages end in divorce.

And more likely than not, debt has a role to play because when you’re short on cash, you’re likely to borrow money to stay afloat. This only increases the amount you end up owing other people.

Here are some very important reasons why you should try to get out of debt as quickly as you can.

  • It lets you have more cash to spend per month
  • Improves your credit score
  • Takes a burden off mentally and emotionally
  • Reduces stress
  • Paying off debt lets you own your assets, especially things like your car and home.
  • It sets a good example for your kids
  • Gives you financial security
  • You can take vacations and reward yourself more

How to Pay Off Debt Fast

Now that we know what debt is and why it’s important to get rid of it, it’s now time to learn how to eliminate debt from your life.

And, it all starts with the right mindset and proper preparation.

Mindset is extremely important because you’ll need to believe that you can pay off your debt. If you don’t believe it, no one else will.

More importantly, you’ll need to take action. If you don’t believe it something, it’s likely you’ll do things half-heartedly.

That’s not going to cut it, especially if you have more than $10,000 in loans.

It’s important to believe because this mindset will give you the strength and resilience to keep going even when things get hard.

Make no mistake, paying off and eliminating debt is going to be challenging.

But, you can do it!

Many people have. And, so could you.

So let’s get to it and make proper preparations to succeed in your debt payoff plan.

Step 1: Start with How Much Debt Do You Have?

The first step is to figure how much debt (in total) you have. You need to consider all your borrowings. Ideally, list them all down so you don’t miss anything.

Knowing your enemy is always the first step in any battle. Here it’s making a detailed list of all your debt and knowing what each one looks like.

The goal is to know exactly how much debt you have. This includes:

  • The total amount
  • How much borrowings you have per debt item
  • What their individual interest rates are.

This will help you decide which ones to take on first. I’ll discuss more below. Once you know the details, it lets you stare your opponent right in the eyes and take action.

One thing to keep in mind as you do this is NOT TO GET INTIMIDATED.

If you have a good amount of debt, it can get daunting as you see the numbers pile up. This can be scary and dangerous. That’s because sometimes the fear of something bad makes us try and ignore it or just pretend it’s not there.

The problem with doing this is it doesn’t help. The issue won’t go away. It won’t get any better on its own. With debt, it actually gets worse because interest increases the total amount you owe the longer you keep it.

Here’s your action plan for Step 1:

1. Write down the debt you need to pay off

Whatever the end figure comes out to be, be ready to confront it. No one else will do it for you.

Next, pull together all your debt. This includes credit card debt, student loans, car loans and everything else you owe.

2. Start listing each debt, its amount owed and its interest rate

A good way to compile this is by using a spreadsheet like MS Excel. All you need are 3 columns. This lets you quickly see the different types of debt you have, how much their balance is and what kind of interest rates they charge.

Excel also lets you estimate how much interest you’re likely to pay daily or monthly for each.

And, it’s easy to total all your borrowings.

3. Post your total debt on something you see every day

This may feel embarrassing. But, it helps remind you of what you need to do. And, it keeps you focused on your goal.

A good way is to write the total debt amount in a sticky note and post it on the fridge or your bathroom mirror. Somewhere that you’ll look at a few times a day.

You may or may not need to write “My total debt” or “Total debt to pay off”. Just the number will do if don’t want other people to understand what it is.

The important thing is that YOU know what it means. And, that you see it every day to keep you motivated.

4. Calculate Your Debt to Income Ratio (DTI)

Your debt to income ratio is just a percentage of how much you’re paying towards debt each month compared to the total amount you’re earning monthly.

Basically, the formula is:

  • Total debt payments for the month / Total income before taxes each month

This is actually a number that lenders, including those assessing your mortgage, use to evaluate your ability to pay off your monthly obligations.

In many cases, a high debt-to-income ratio makes them reject your application. But, that’s for another article.

For your purposes, your DTI ratio will give you a good idea if you:

  • Have too much debt
  • Are not earning enough
  • Or both

This gives you a good place to start on how to eliminate debt.

How to Calculate Your Debt-to-Income Ratio
a. Get the total of all your monthly debt

This includes all the debt and interest payments you’re making every month. Among the things to include are:

  • Rent or monthly mortgage payments
  • Month to month credit card payments
  • Student loans paid each month
  • Payments for your car loan
  • All your other debt payments

For example, you pay

  • $125 each month for your auto loan
  • $1600 monthly for your mortgage.
  • $300 monthly for all the other loans combined

So, your total monthly debt = $125 + $1,600 + $300 = $2,025

b. Divide the total monthly debt payments by your gross income

Using the previous example, if you bring home $5,000 each month before taxes and other monthly deductions, here’s what you get:

Debt to Income Ratio = $2,025 / $5,000 = 0.0405 or 40.5%

That means your Debt to Income Ratio is 40.5%

Debt to Income Ratio Calculator

If you aren’t a fan of math, you can use the debt to income ratio calculator from Wells Fargo here.

All you need to do is plug in your total monthly debt payments and your total gross take home pay and it will give you your DTI ratio.

What Your Debt to Income Ratio Number Means

Your debt to income ratio is an important figure used by financial institutions because it can quickly tell you a lot about your financial health situation.

In general, the lower the percentage, the better off you are. That is, you’re more likely to be able to pay for your monthly debt payment obligations. Thus, borrowers are more willing to lend you their money because they know you’ll be able to pay.

Here’s a quick chart to help you see where you stand.

Debt to Income RatioWhat it MeansWhere You Stand
35% or lowerYou’re in Good ShapeYou have extra money to spend for buying things after paying off your monthly debt payments
36% to 49%Look for Ways to ImproveYou have enough to pay the monthly debt payments but may get in a bind if unforeseen expenses or emergencies suddenly come up. So, it’s a good idea to improve your DTI a bit.
50% or aboveYou need to start taking actionMore than half your monthly earnings are going to paying off debt. This leaves you little for yourself. It also means lenders are less likely to lend you bigger amounts. You need to start cutting debt or increase your monthly earnings.

As a side note, most lenders look for debt to income ratios around 40% to 50%. Many mortgage lenders use a threshold of around 43% as their cut off point when considering borrowers.

That said, don’t worry too much about what the final number is, even if it’s high.

For your purposes, it’s just a starting point. And, by following the steps, below, you’ll quickly see your Debt to Income Ratio dwindle over the next few months.

A high DTI ratio only means you need to focus on reducing your debt. As you do, your debt to income ratio will follow automatically.

This is what we’ll focus on the following sections below.

For now, here’s a quick outline of that plan.

1. Start creating a budget and limit unnecessary spending
2. Make a realistic plan to pay off your debt
3. Make your debt less burdensome by renegotiating some of the interest rates
4. Don’t take on any more debt

Step 2: Develop a Get Out of Debt Mindset

Before you spring into action, it’s important to get your head in the right mindset. We touched on proper money mindset above. Now, we’ll break down the steps.

  • First you have to believe you can do it. You already have all the information above. So, you know your enemy. And, you know each of them individually in detail.
  • Next, you need to decide to pay off your debt. Debt payoff will be a priority. That means always being aware of your debt and being ready to sacrifice some things in the short term, like spending or taking a vacation, for better things in the long term.
  • Be focused on it and be consistent. This is just as important as the first two. You need to stay focused, make paying off debt and saving a habit and stay consistent. If you have debt that’s more than $10,000, it will take a few months at least. So, consistency is key.

Step 3: Choose a Debt Payment Plan

Now, it’s time to choose a debt payoff plan. There are a lot of methods and techniques around. But, for your purposes, you’ll be deciding between two of them.

Both work. And, they’re effective in eliminating debt.

The only question is, which one suits you best.

Here they are.

Debt Payment Plan 1: The Debt Snowball Method

This method was popularized by Dave Ramsey. The theory behind this method is that pay off your smallest debt first. Because it’s the least, it’s easier to get one item off your list.

This gives you a quick win. And, it helps give you confidence and motivation.

Here’s how to use the debt snowball method to pay off debt.

1. List all your debts and arrange them from smallest to biggest in terms of balance. Don’t worry about interest rate or interest amount. The focus will be on the smallest borrowed amount.
2. Pay the minimum for all the debts except for the smallest one.
3. For the smallest, you want to pay it off as quickly as possible.
4. Once the smallest is paid off, target the next smallest one. And, keep going up to the next smallest debt each time you finish with the current one.
5. This lets you free more money each time you get rid of one debt, allowing the extra cash you roll over to pay the remaining debt to snowball.
6. Keep doing this until all your debt are paid off.

Debt Payment Plan 2: The Debt Avalanche Method

The debt avalanche is somewhat the opposite. But, this time you’ll be targeting the debt with the highest interest rate.

Doing so helps slow down the rate at which your interest accumulates. Since you’re only leaving lower interest rate debt, the growth of your payments slows down considerably.

Here’s how to use the debt avalanche method to pay off debt.

1. Organize all your debt and arrange them according to their interest rate. Go from highest to lowest interest rate.
2. Pay the minimum on all your debt except the one with the highest interest rate.
3. For the debt with the highest interest rate, pay extra or whatever you can to quickly pay it all off. The goal is to try to get rid of it as soon as possible.
4. Once you pay off the debt with the highest interest rate, do the same for the debt with the next highest interest rate. Keep going to the next highest interest rate each time you finish paying off the current debt.
5. Keep repeating until you eliminate all your debt.

Since you’re paying the highest interest first, this lets you save more money in the longer term. It also lets you free up more money sooner to use to pay for the remaining loans.

But, you don’t get a quick win. Since the debt may be have a bigger balance, it may take longer than the snowball method to get each debt item off your list.

Which One is Better?

Technically debt avalanche lets you pay off debt faster. It’s also more efficient because you save a lot more money in the long run.

That said, social studies research shows that people tend to do better with the debt snowball method.

That’s because by nature, we as humans are not rational. We tend to lose motivation, let our emotions get the best of us and fail to stay consistent when we don’t see tangible results.

The longer the project or task, the more likely you lose track or interest.

This is why results of studies related to debt payment behavior show that the debt snowball works better for most people. We like getting quick wins to stay motivated.

That said, whichever method you choose, keep in mind that you want to pay down one debt at a time, as opposed to trying to pay off all of them at the same time.

Studies show that focusing on one debt at a time before going to the next one produces better success than trying to pay off all your debts at the same time.

That’s because you’re able to focus more on the current debt at hand. And, you don’t get overwhelmed by the sheer number and total amount you need to overcome.

Step 4: Make Sure to Prioritize Your Debt Payoff Plan

Finally, it’s important to make debt payoff a priority. To do so, you need to stay focused and consistent until all your loans are gone.

Here are a few ways to do it.

  • Keep debt payoff at the top of your priorities list. By making paying off debt and saving money a habit, it will become second nature to you. This will make you think twice before spending on large ticket items or unnecessary ones.
  • When you have extra money come your way, set it aside for debt payment first and foremost. Use any extra savings, bonuses or tax refunds towards paying off debt. This helps you save more money because you’ll end up paying less in interest over time.
  • Set a deadline to pay off debt. Here, you have 2 options. Set a deadline for the entire amount. Or, set many smaller deadlines, one for each debt. The latter is easier to follow through on because you achieve small victories along the way, which help motivate you to keep going. Deadlines help provide a sense of urgency which helps keep you focused on what you need to do.
  • Don’t take on any more debt. This is very important. Using debt to pay off debt never works. It only makes things worse. Plus, it also increases the amount you need to pay.
  • Stop using your credit card. Among the different types of debt, this is the one you’re most likely to take on more of. So, the best way to prevent this from happening is to stop using your credit card all together, at least until you pay off your debts. Credit cards are dangerous because of the high interest rates they charge.

Other Helpful Ways to Pay Off Debt Faster

Make More Money

In many cases, the simplest solution to money problems is to make more money. Unfortunately, that’s easier said than done. Otherwise, no one would be in debt.

If you’re trying to pay off debt, earning extra money really helps. Even if you need to hustle a little bit more in the short-term. It will all be worth it if you pay off debt faster.

That’s because the longer the debt lingers, the more you end up paying in interest expenses.

From your debt to income ratio, you’ll be able to get a good idea of how your monthly earnings stack up against your monthly debt payments. If it’s high, making extra money may be a good idea because it will quickly improve your debt to income ratio. And, you’ll be able to pay off debt faster.

Here are some ways to make extra money while you work a full-time job.

  • Blogging
  • Virtual assistant
  • Freelance writing
  • Proofreader
  • Pay surveys
  • Use cashback card programs
  • Move your money to higher interest earning bank accounts
  • Get a part time job
  • Do gigs or offer services

Stop Doing the Things That Got You into Debt

Like all things in life, it’s important to learn from your mistakes. So, you need to set aside some time to take stock and see what are the things that got you into this debt situation in the first place.

What Caused You to Take Out Debt?

Was it student loans, losing your job, or your rent. Did uncontrolled spending or too much eating out worsen the situation?

It’s important to know the exact reasons why you have debt. This lets you:

  • Avoid doing them again
  • Avoid doubling down on them.

Doubling down simply means worsening things by digging a deeper hole. For example, majority of your debt comes from student loans. So, considering a Master’s degree or PhD. may not be a wise move.

Doing so only makes you double down on an already losing bet.

The best way to figure out what got you to where you are is by making a detailed list of all your debt, when and why you took them out.

Track Your Expenses

Similarly, you may also want to list your expenses. Sometimes, spending leads to debt, especially credit card debt and personal loans.

In this situation, it’s important to track your expenses religiously.

Reevaluate Your Budget Every Now and Then

Your budget isn’t something static. It’s a dynamic being that keeps changing month after month. When a new expense come up, you’ll need to add it to your budget to stay accurate.

When you’re paying off debt, the goal is to reduce unnecessary spending. Having a budget lets you easily see how much you’re spending for each item.

This makes it easier to decide whether or not that expense item is a NECESSITY or a LUXURY. In other words, do you NEED IT or do you JUST WANT IT?

The former is something you can’t live without like food, insurance, electricity and water. The latter, you can do without. Things like eating out, brand name clothes or new shoes are things you want but may not really need.

Start by cutting expenses that you don’t really need. Or, look for cheaper alternatives. Some examples including looking for a cheaper place so rent goes down or commuting instead of owning a car. Smaller things like switching from name brands to generic also helps reduce costs.

Finally, as you do your monthly budget, you should be seeing the amount you pay for debt and interest slowly dwindle each month. If that’s not happening, go back and reassess your debt payment plan because something’s not right.

Pay More Than the Minimum Payment

Credit cards always try to entice you to pay the minimum amount by putting it front and center in your billing statement.


Because any amount of your total balance you don’t pay, they get to charge you interest for it.

That’s a good deal for them. But, not so much for you.

In fact, it increases your debt because now you not only have to pay the original balance, you also need to pay the extra interest that keeps increasing by the day.

By paying off more than the minimum you not only pay less through the entire life of the loan but also get rid of the debt faster.

Sell Stuff You Don’t Need or Use

We all have stuff we never use or don’t need anymore. Instead of letting them collect dust in the basement or attic, why not sell them?

You can sell them online on eBay or Craigslist. Or, you can have a yard sale.

You can use the extra funds you raise from selling them towards paying off debt.

Renegotiate Your Loans and Bills

If you’ve been with a company for a while you can try renegotiating your loans and bills. This allows you to get lower interest rates on debt you owe them.

Doing so will help reduce the monthly payment burden. This frees up more of your cash to pay off existing debt.

At the top of your list of loans to renegotiate are your credit cards. This will help lower the interest on your balance.

Other things to consider renegotiating are your car insurance rates, rent, medical bills (if you have any), internet subscription and cable TV.

Always remember, it never hurts to ask. If they don’t give it to you, you don’t lose anything. If they do, you out ahead.

Do a Balance Transfer to Get Lower Interest Rates

Credit cards charge high interest rates. Additionally, the interest gets compounded.

That means that the interest that’s made for today is immediately added to your debt balance by day’s end. So, the total interest you’re charged the next day is always be higher than what you were charged today.

This means not only is the amount you’re paying for interest growing at a fast rate, it’s also growing at an accelerating pace.

This is why it’s not a good idea to have credit card debt.

If you do, try renegotiating the rates with your bank. If they agree, you’ll be paying much less.

If they don’t, you may want to consider doing a balance transfer.

Balance transfers let you move your current credit card debt from one card to another. The catch is, you get to choose the new card.

So, you can pick one that charges a much lower interest rate (APR).

Here’s another cool trick.

Many banks offer promos to entice you to transfer your existing card balances to theirs. To do so, some even offer 0% APR as an introductory promo.

This means you can move your current balance to something that pays 0% interest for the meantime. How long depends on the promo period. Some cards offer 12 months, others 15 or more.

This give you reprieve from additional interest expenses that can accumulate during that time.

But, do read the terms & conditions before signing for a new credit card. Some come with strings attached. Also, don’t forget to look at the regular APR. It may turn out to be higher than what your current card has. Ideally, find something that has a lower APR so you don’t have to deal with overly high interest rates later on.

Closing Thoughts

Nobody likes having debt. Unfortunately, there are some situations where we need to take out loans to pay for things we need. When this happens, it’s always important to keep a sharp eye on any borrowings you may have, because they can pile up. As such, it’s important to try and pay off your debts as quickly as possible. Hopefully, the tips can help you get out of debt faster.

Leave a Comment

Your email address will not be published. Required fields are marked *

Show Buttons
Hide Buttons