Tips For Paying Off Debt

Debt is something that is easy for you to get into, but it can be tricky for you to get out of it. The good news is that debt does not have to control your life. You can get out of debt and become financially free by doing the following.

Create a Budget

You cannot start paying off your debt until you know exactly where your money is going. That is why it is important for you to start with a budget. A budget doesn’t have to be anything fancy. You simply have to know how much money you have going in and coming out. You can use an Excel spreadsheet to budget. You can also use Mint or another budgeting app. The CFPB’s budgeting tool is another free resource that walks you through tracking income and expenses step by step.

Find a Strategy That Works for You

There are different strategies for paying off debt. Some people like to start with the smallest debt first because paying off a smaller debt gives them the confidence to tackle a larger one. Paying your debts from smallest to largest is often referred to as the debt snowball method, a term popularized by personal finance educator Dave Ramsey. Research published by the Harvard Business Review found that borrowers who focused on paying off individual accounts in full showed greater motivation and were more likely to eliminate their overall debt load.

While you are focused on paying your smallest debt, make sure that you at least make the minimum payment on the other ones. The debt avalanche method is where you pay off the debt with the largest interest rate first. This method may help you get out of debt more quickly because high interest rates can make it hard for you to lower the balance. Lenders such as SoFi and Chase often provide online calculators to help you model which payoff method saves you the most money over time. Your FICO Score can also improve as your overall debt-to-income ratio — commonly referred to as your DTI — decreases.

Opt for a Balance Transfer

If you have a credit card, then you may want to get a balance transfer. This allows you to take the debt from one credit card and put it on another one. A balance transfer can help you save money and get out of debt more quickly by lowering your interest rates. Many issuers, including Chase and Citi, offer introductory 0% APR periods ranging from 12 to 21 months on balance transfer cards, according to NerdWallet’s balance transfer card analysis. However, this option is often only available for people who have good credit. You have to get approved for another credit card first, which often requires a minimum credit score. Most issuers look for a FICO Score of at least 670 to qualify for the best balance transfer offers, per Experian.

Debt Consolidation

Multiple debts can be difficult for you to manage. You have to keep up with multiple due dates and payments. That is why you may want to consider taking out a loan and consolidating your debts. Not only can you get out of debt faster by only having to make one payment each month, but you can also save on interest. Lenders like SoFi, LightStream, and Marcus by Goldman Sachs offer personal loans specifically designed for debt consolidation, often with fixed APRs starting below 12% for well-qualified borrowers. The FDIC recommends carefully comparing loan terms and fees before consolidating to ensure the new loan genuinely reduces your total cost of borrowing.

Debt Payoff Method Comparison

*Estimated figures based on a $15,000 total debt balance at a starting APR of 22%. Actual savings will vary based on individual circumstances.

Stop Using Your Credit Cards

If you want to get out of debt, then you have to stop creating more. That is why you need to stop using your credit card. You may want to take all of your credit cards out of your wallet so that the temptation to use them goes away. If you frequently shop online, then you can delete this information from the store websites.

Additionally, if you have good credit, then you may find yourself constantly getting credit card offers in the mail. You can opt out of pre-screened credit card offers at OptOutPrescreen.com, which is the official Consumer Credit Reporting Industry website authorized under the Fair Credit Reporting Act (FCRA) and overseen in part by the CFPB.

Find Ways to Earn Extra Money

You can increase the amount of money that you pay toward your debts each month and get out of debt faster by earning extra money. There are a number of ways that you can bring in extra money each month. For example, you can ask your boss if you can work overtime a few days each week. You can also get a part-time job if you have extra time.

If you want to bring in extra money without having to get another job, then you may want to pick up a side hustle. The gig economy makes it possible to make money through platforms like DoorDash, Lyft, Uber, and Instacart. You can also sell handmade or vintage goods on Etsy. According to a Bankrate survey, roughly 36% of U.S. adults reported having a side hustle, with median monthly earnings of approximately $810 — money that can meaningfully accelerate debt repayment when applied consistently.

Talk to a Credit Counselor

There is nothing wrong with turning to a professional if you are feeling overwhelmed with your debt. Credit counseling may be what you need in order to get your finances on track. There are several ways that a credit counselor can help you. For example, if you need help with developing and managing a budget, then a credit counselor can help you with that. Nonprofit agencies affiliated with the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA) are widely regarded as trustworthy starting points.

They can also help you understand what is on your credit report and your FICO Score or VantageScore. Additionally, they can give you free educational materials. The CFPB also offers a free debt collection resource center that explains your rights as a borrower under the Fair Debt Collection Practices Act (FDCPA).

Lower Your Monthly Bills

If you lower your monthly bills, then you will have more to put towards paying off your debts. You may want to consider getting rid of unnecessary monthly bills such as streaming subscriptions and cable. If you feel like you are spending too much money on your electric bill, then you can get an energy audit. The U.S. Department of Energy estimates that homeowners who act on energy audit recommendations can reduce their energy bills by 5% to 30% annually, freeing up meaningful cash for debt repayment.

Consider Getting Debt Relief

If you are overwhelmed with debt and do not see a way out of it, then you should consider getting debt relief. Debt relief companies will charge you a fee for their services. However, they can greatly help you by negotiating with your creditors so that you can settle your account for less. In fact, many people are able to pay off their accounts for significantly less than what they owe. The Federal Trade Commission (FTC) provides guidance on how debt settlement works and what warning signs to watch for when evaluating debt relief companies.

However, there are a few downsides associated with getting debt relief. The debt relief company will usually tell you to not make any payments so that they can start the negotiation process. This can cause your FICO Score to decrease. You may also be charged late fees. The CFPB warns that debt settlement can have long-lasting negative impacts on your credit report, sometimes remaining on your Experian, Equifax, or TransUnion credit file for up to seven years.

Do Not Re-Start Bad Habits

Once you have managed to pay off your debt, the last thing that you want to do is get right back into it. That is why it is important to avoid the bad habits that caused you to get into debt. If you are struggling with money management, then it is a good idea to talk to a financial advisor. You can find a fee-only Certified Financial Planner (CFP) through the CFP Board’s advisor search tool to help you build a long-term financial plan that keeps debt from taking over your life again.

Frequently Asked Questions

What is the fastest way to pay off debt?

The fastest way to pay off debt is to use the debt avalanche method — directing extra payments to the balance with the highest APR first while making minimum payments on everything else. Combining this with a balance transfer card offering a 0% introductory APR or a debt consolidation loan at a lower interest rate can further accelerate your timeline.

What is the difference between the debt snowball and debt avalanche methods?

The debt snowball method focuses on paying off your smallest balance first, providing quick motivational wins. The debt avalanche method targets your highest-interest debt first, minimizing the total interest you pay over time. Research from the Harvard Business Review suggests the snowball method can improve follow-through for some borrowers, while the avalanche method typically saves more money overall.

Does debt consolidation hurt your credit score?

Debt consolidation can cause a temporary, minor dip in your FICO Score when a lender performs a hard inquiry on your credit report. However, over time, consolidation can improve your score by lowering your credit utilization ratio and making it easier to make on-time payments. Experian and the CFPB both note that the long-term credit impact of responsible consolidation is generally positive.

How does a balance transfer card work for paying off debt?

A balance transfer card lets you move existing credit card debt onto a new card, often with a 0% introductory APR for 12 to 21 months. During that period, every payment goes directly toward your principal rather than interest. Most cards charge a balance transfer fee of 3% to 5% of the transferred amount, so it is important to calculate whether the interest savings outweigh that upfront cost.

How much can a credit counselor help with debt?

A nonprofit credit counselor affiliated with the NFCC or FCAA can help you build a budget, understand your credit report, and enroll in a Debt Management Plan (DMP) that may reduce your APRs to as low as 6% to 9%. DMPs typically take 36 to 60 months to complete but can save thousands of dollars in interest compared to making only minimum payments.

What credit score do you need for a balance transfer card?

Most issuers require a FICO Score of at least 670 to qualify for a balance transfer card with a 0% introductory APR offer. Borrowers with scores above 740 generally have access to the longest promotional periods and the lowest balance transfer fees. You can check your credit score for free through Experian, Chase Credit Journey, or the CFPB’s credit resources page.

Is debt settlement the same as debt consolidation?

No. Debt consolidation combines multiple debts into one new loan or account, typically at a lower interest rate, and you repay the full amount owed. Debt settlement involves negotiating with creditors to accept less than the full balance you owe. While settlement can reduce the total amount paid, the FTC and CFPB both caution that it can severely damage your credit score and may result in tax consequences on forgiven amounts.

How does stopping credit card use help pay off debt faster?

Continuing to use credit cards while trying to pay off existing balances essentially offsets your progress — each new charge adds to the amount you owe. Removing cards from your wallet, deleting saved payment information from online retailers, and opting out of prescreened credit offers at OptOutPrescreen.com all help reduce the temptation to add new debt while you focus on eliminating what you already owe.

Can side hustles really make a meaningful difference in debt repayment?

Yes. According to Bankrate, side hustle earners bring in a median of about $810 per month. If that full amount were applied to a $15,000 credit card balance at a 22% APR, it could cut the repayment timeline from over seven years (minimum payments only) down to roughly two years, saving thousands of dollars in interest.

When should I consider talking to a financial advisor about debt?

If you have paid off debt but find yourself falling back into the same spending patterns, or if your debt involves complex assets, taxes, or retirement accounts, it may be time to speak with a Certified Financial Planner (CFP). The CFP Board’s advisor search tool can help you find a fee-only fiduciary advisor who is legally required to act in your best financial interest.