Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders, all opinions are our own.
Take a minute to unpack all the different types of debt you have. Think of things like home loans, auto loans, student loans, credit cards, and everything else — because the way you pay off debt could vary depending on the type of debt you have.
Here are 10 ways to pay off debt:
- Create (or update) your budget
- Cut your spending
- Review your monthly bills and subscriptions
- Use the debt avalanche method
- Try the debt snowball method
- Find a balance transfer
- Sell your things
- Use a cash windfall
- Take out a personal loan
- Find a side hustle
1. Create (or update) your budget
If you’ve never created a budget, now is the time. Write down all your expenses: everything from your mortgage payment (or rent) to student loans. Don’t forget to include lines for gas and food. Then write down how much you earn each month.
Deduct your total expenses from your income and the leftover cash can go towards debt. Your budget isn’t set in stone; you can update it as often as necessary. If you get a raise at work, you can make adjustments to your budget as you see fit. It should just always be your reference point to stay on track.
2. Cut your spending
If you’re not finding any extra cash in your budget, you might need to make adjustments. For instance, if you give yourself $80 a week for eating out, you might want to cut it to, say, $50 a week — and eat at home more. Then you can put those extra savings towards your outstanding debt.
3. Review your monthly bills and subscriptions
Review your monthly subscriptions for things you might not need (and might not be using) like video streaming services you could go in on with a friend or family member instead. See if you can bundle similar things, like car and home insurance or internet and cable or find ways to cut them out completely.
Also go over your internet, insurance, and cable bills — sometimes it helps to call your provider to see if there are any new discounts to take advantage of that will help you shrink your monthly bill.
4. Use the debt avalanche method
One of the biggest reasons debt is such a problem is due to high interest rates. If you have a lot of the same debt, like student loans or credit cards, for example, you might want to take charge of them through the debt avalanche method.
With this, you’ll list out all your debt details, like what you owe, your minimum monthly payment, and the interest rates for each. Then you’ll start putting every extra dollar you have toward the debt with the highest interest while still making minimum payments on your other debts. You’ll do this until the highest-interest debt is paid in full.
Once you’ve completed one debt, move on to the next-highest interest debt and put every extra dollar you have towards it. Keep it going until you pay off your student loans (or other debt, like credit cards) completely.
5. Try the debt snowball method
If instead you’re more motivated by small victories, try the debt snowball method. While the debt avalanche method focuses on the highest interest debt, the debt snowball works on the smallest balance first.
You’ll list out all of your debt in the same way, but you’ll put all your extra money toward the debt with the lowest balance while still making minimum payments on all your other debt. Once you’ve paid off your smallest debt, move on to your next-smallest debt and continue on until all your debt is paid off.
6. Find a balance transfer offer
If you’re suffering from high-interest credit card debt, you might want to find a 0% APR introductory rate on a balance transfer to a new credit card. This method allows you to move over and pay off credit card debt without accumulating more interest.
Some balance transfers have a 0% introductory rate from anywhere between 15 and 21 months[a], depending on the card you choose. But keep in mind most of these offers include a balance transfer fee which could be up to 6% of the amount you’re transferring.
While you’re paying off this debt, you shouldn’t spend more on the new card and you should pay it off before the introductory period ends. This will help you avoid getting into more debt for even longer.
7. Sell your stuff
If you’re struggling to find extra room in your budget, it might be time to off-load some things you no longer have a need for.
Take inventory of your closet, garage, or any other place that’s got a lot of stuff in storage. Do your research to see if any of your goods can net you a solid return. Start listing them online through sites like OfferUp, Decluttr, or even Amazon or eBay. Then you can put all your earnings toward your debt.
8. Use a cash windfall
If you’ve been crushing it at work and your boss notices, you might get rewarded through a bonus or raise. Or maybe you got a hefty tax refund. This is not only great for your career, but also your debt.
You can put the cash from your windfall toward your outstanding debt or use the extra monthly income to make larger payments. If you’re trying to pay off your mortgage sooner, for example, the extra payments toward your home loan can help reduce
your total balance.
9. Take out a personal loan
Sometimes it takes a new debt to help you pay off a new one — as long as you do so wisely.
If you have good credit, you might consider a debt consolidation loan. A debt consolidation loan is when you take out a personal loan to pay off all your outstanding debt and then make payments on your personal loan until it’s paid in full.
Credible allows you to compare some of the best personal loan lenders to see which ones offer the lowest interest rates and lowest fees, so you can find the right loan for your situation.
10. Start a side hustle
If your day job is giving you just enough money to make ends meet, it might be hard to pay off debt. If that’s the case for you, consider finding a side job, or something you can do to make some extra cash while you’re not working.
A side hustle is different for everyone. Here are some options to consider:
- Delivering groceries through apps like Shipt or Instacart
- Selling your handmade goods on sites like Etsy
- Writing, designing, or web developing for clients via freelancing
You have plenty of ways to start earning money on the side, and you can start using that extra cash you earn to pay down debt. While your day job can pay for your needs, your side hustle can help you make larger debt payments, giving you the chance to pay it off sooner and finally be debt free.