One of life’s biggest stressors is debt. Whether it’s from student loans or credit cards, debt can really restrict your life. When it comes to setting financial goals, such as purchasing a home or saving for retirement, debt can make it difficult to achieve those goals. Even worse, debt can make you feel like you have no freedom to spend money on things you need and want.
You’re not alone in the struggle to pay off your debt as quickly as possible. Try practicing one or more of these methods to pay off your debt as quickly as possible and to reduce your stress.
Interest rates can drastically increase your debts over time. Credit cards, in particular, can charge interest rates as high as 30%.
If your credit cards have high interest rates, consider applying for a balance transfer credit card.
Balance transfer cards typically offer extended introductory periods with a 0% APR. You can transfer your debts from other credit cards to your balance transfer card to reduce your interest rate for several months.
During this period, you can pay off as much of your debt as possible without accruing additional debt from interest.
Keep in mind that balance transfers usually require a fee from 3% to 5%. Do the math. Your savings on interest may outweigh the cost of the fee.
You might already be familiar with the snowball method, which encourages you to pay off your smallest debts first.
Alternatively, you can approach paying off your debts with the debt avalanche method.
Here’s how it works. Make a list of all of your debts, from highest interest rate to lowest interest rate. Every month, make the minimum monthly payment on each debt, putting additional payments toward the debt with the highest interest rate until it is paid off.
After the first debt is paid off, simply continue with the next-highest interest rate until you eventually pay off the debt with the lowest interest rate.
While the snowball method is great for those who struggle with motivation, the debt avalanche method is a more practical solution that will help you save money on interest and get rid of your debt faster.
Sure, you might have thousands of dollars’ worth of credit card debt, but that likely means you’ve earned some decent rewards. Pretty much any credit card company will allow you to apply your rewards directly to your balance in the form of a statement credit, so be sure to do so if you haven’t already.
A cash-back reward most likely has the highest value when you redeem those rewards, but you may also be able to use travel points and miles. Even if they have a reduced value, it will still help you pay off some of your credit card bill—instead of using those rewards on an unnecessary vacation.
Credit card consolidation loans offer another solution for people who are carrying high-interest credit card debt.
Credit card consolidation loans allow you to consolidate your credit card debt into a debt consolidation loan.
Typically, the repayment time frame for these loans is anywhere from three to seven years. You might have to do a little bit of shopping around to get an offer with a low interest rate.
However, if your current credit card interest rate is 20%, for example, and you have a personal loan offer with an 8% APR, you could potentially save thousands of dollars and knock several months off your debt repayment time frame.
You don’t have to wait until the end of the month to make a credit card payment. One of the simplest ways to pay off your debts faster is to make multiple payments per month.
As most people are paid on a biweekly basis, you can simply make a plan to contribute to your outstanding debts every time you get your paycheck. This will help quickly reduce your principal balance and help you save on interest.
Additionally, you should apply any unexpected income straight to your debts. For example, you may receive performance bonuses at work. It can be tempting to use this extra money on unnecessary expenses. After all, this income likely isn’t factored into your monthly budget, so spending it on luxuries wouldn’t hurt you.
However, when you’re finally debt-free, whether that’s in six months or six years, you’ll be glad you put every spare dollar you had toward your debts. Simple luxuries might bring temporary satisfaction, but paying off your debts will surely reduce your long-term stress.
Debt is no joke. It can cause extreme stress and severely impact your well-being. Using one or more of these methods is a great way to start chipping away at your debts as quickly as possible.