{"id":25397,"date":"2022-08-08T14:54:17","date_gmt":"2022-08-08T19:54:17","guid":{"rendered":"https:\/\/www.avant.com\/blog\/?p=25397"},"modified":"2023-04-24T09:32:31","modified_gmt":"2023-04-24T14:32:31","slug":"how-to-pay-off-your-debt-faster","status":"publish","type":"post","link":"https:\/\/www.avant.com\/blog\/budget\/how-to-pay-off-your-debt-faster\/","title":{"rendered":"How to Pay Off Your Debt Faster"},"content":{"rendered":"

Key Takeaways<\/b><\/h2>\n

If your debt is weighing you down, it\u2019s time to break free of it. While you can\u2019t just make it disappear, you can use strategies like debt consolidation and a targeted repayment approach to ease the load, helping you pay it off faster. Here\u2019s what you should know about debt payoff strategies to help you breathe easy and feel more confident about your financial future.<\/span><\/p>\n

Are you looking for a shortcut to <\/span>pay off your<\/span> debt sooner? <\/span>The best way to build momentum in your debt repayment efforts is to follow a debt payoff strategy or submit larger monthly payments. Keep reading to learn tips on both of these so that you can pay off your debt as fast as possible.<\/span><\/p>\n

Remember, the sooner you amp up your debt repayment process, the quicker you will experience financial freedom.<\/span><\/p>\n

Pick a Debt Payoff Strategy<\/b><\/h2>\n

Knowing how to pay off debt fast doesn’t have to remain a mystery. There are four primary methods for paying off credit card and other debts quickly: the debt snowball method, the debt avalanche method, a debt consolidation loan, and a balance transfer credit card. All methods have their own benefits, and the one that\u2019s right for you will depend on your situation.<\/span><\/p>\n

\u00a01. Debt Snowball Method<\/b><\/h3>\n

This way to pay off debt focuses on paying off the account with the lowest balance first. You\u2019ll continue to make minimum payments on your other accounts, but you\u2019ll put as much as possible toward the account with the lowest balance until it\u2019s paid off. When that one reaches $0, do the same for the next account with the lowest balance.<\/span><\/p>\n

For instance, say you have credit cards with balances of $400, $1,000, and $1,400. Plan to make the minimum payments for the $1,000 and $1,400 cards, but pay as much as you can on the $400 balance each month. When that balance gets to $0, start paying down the $1,000 balance while continuing to make minimum payments on the $1,400 balance.<\/span><\/p>\n

Pros<\/b>
\n<\/b>With the snowball approach, you\u2019ll pay off debt fast, one account at a time. It\u2019s not quite instant gratification, but it\u2019s close enough to keep you motivated and provide a sense of accomplishment. Plus, you\u2019ll steadily reduce the number of outstanding balances you have, which can ease your stress.<\/span><\/p>\n

Cons<\/b>
\n<\/span>The snowball method may be the best way to pay off debts with similar or low interest rates, but it doesn\u2019t account for debts with high interest rates. If your highest account balances have the highest interest rates, you may want to choose a different method of paying off your debt to avoid paying more in interest.<\/span><\/p>\n

2. Debt Avalanche Method<\/b><\/h3>\n

This method focuses on accounts with the highest interest rates, minimizing the amount you pay over time. To use the debt avalanche method, look at the statements for each credit card and loan you have open, and note the Annual Percentage Rate (\u201cAPR\u201d). The card or loan with the highest APR is the one you should start paying down first, then move on to the next.<\/span><\/p>\n

In this case, imagine you have three lines of credit with APRs of 15.99%, 18%, and 21.99%. With this method, you would focus on paying down the account with the 21.99% APR, regardless of each account\u2019s balance. You\u2019d then pay down the line of credit with 18% APR, leaving the 15.99% APR account for last.<\/span><\/p>\n

Pros<\/b><\/p>\n

The debt avalanche approach saves you money by reducing the amount of interest you pay on your debts. For accounts with high interest rates, this could save you hundreds of dollars over time.<\/span><\/p>\n

Cons<\/b>
\n<\/span>Accounts with high balances will take a while to pay down. If the account with the highest interest rate also has a high balance, you could make payments for a year or more before it\u2019s paid off, which can be frustrating or disheartening. If you think slow progress will be discouraging, consider other ways to pay off your debt.<\/span><\/p>\n

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  1. \n

    Debt Consolidation Loan<\/b><\/h3>\n<\/li>\n<\/ol>\n

    A debt consolidation loan can simplify your life and your finances, and it can save you money. With this approach, you take out a personal loan equal to the balances of the credit cards and loans you have and use it to pay off your debts. This leaves you with one monthly payment instead of several, and if you find a personal loan with a low interest rate, you\u2019ll pay less over time.<\/span><\/p>\n

    For example, say you have four credit cards or open accounts, with balances of $500, $700, $800, and $1,000. The highest APR on these is 21.99%. For debt consolidation, you would want to take out a $3,000 loan (enough to cover your existing debt) with an APR of 20% or below for the best savings. From that point forward, you\u2019d only need to make one monthly payment, and you\u2019ll pay less interest.<\/span><\/p>\n

    Pros<\/b><\/p>\n

    Consolidating your debt into one loan means only having one monthly payment, and with a <\/span>debt consolidation loan through Avant<\/span><\/a>, you\u2019ll have one fixed interest rate. Budgeting will be simpler, and your monthly payment may be lower than the sum of the payments you were making before. Personal loans may also offer lower interest rates than credit cards, so consolidation is especially advantageous if credit cards are your main source of debt.<\/span><\/p>\n

    Cons<\/b><\/p>\n

    If your credit could use some improvement, you may receive a higher interest rate or lower loan amount than you\u2019d like. In these situations, <\/span>other options for debt consolidation<\/span><\/a> may be a better fit for you.<\/span><\/p>\n

    4. Balance Transfer Credit Card<\/b><\/h3>\n

    This is another consolidative way to pay off debt. A balance transfer credit card allows you to transfer balances from other accounts to the new card, paying off those balances and resulting in one new balance and payment.\u00a0<\/span><\/p>\n

    Balance transfer credit cards can offer special introductory APRs \u2013 even 0% APR for a short time. This could\u00a0 allow you to pay off part or all of your existing debt with little to no interest, potentially generating significant savings. Once the introductory period is over, though, interest will begin to accrue.\u00a0\u00a0<\/span><\/p>\n

    Pros<\/b><\/p>\n

    There\u2019s nothing like being able to pause the interest accrual on a debt. Some balance transfer credit cards offer 0% APR during the introductory period, which could last for a year or more. Stopping the accrual of interest could help give you a leg up on paying down your balance, and it may motivate you to pay it down faster.\u00a0<\/span><\/p>\n

    If you\u2019re able to pay it all off before the introductory period expires, you’ll avoid paying interest at all on the balance you transferred, which can make a world of difference to your finances.<\/span><\/p>\n

    Cons<\/b><\/p>\n

    Balance transfer cards may charge a fee each time you transfer a balance to it, usually 3-5% of the transferred amount (with a $5 or $10 minimum fee). If you\u2019re transferring $3,000 to the card, a 5% fee would be $150, which is added to the card\u2019s balance.\u00a0<\/span><\/p>\n

    You\u2019ll also have a credit limit on the balance transfer card. If you have a $2,500 limit but $3,000 of debt, you\u2019d be left with $500 still on the original account, accruing interest. If you still have a balance when the introductory period ends, interest will start accruing. The introductory period can be revoked early if you make a late payment.<\/span><\/p>\n

    Another consideration is how this move could impact your credit score. Credit utilization accounts for 20% or more of your overall score, so if the balance you\u2019re transferring is close to the credit limit on the balance transfer card, your score may take a hit.<\/span><\/p>\n

    Increase Your Monthly Debt Payments<\/b><\/h2>\n

    Increase Your Income<\/b><\/h3>\n

    Increasing your monthly payments is a reliable way to pay off credit card and loan debt fast. Here, we break down different approaches and tips for paying off credit card debt and loans by increasing your payments.<\/span><\/p>\n