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4 Methods To Get Out Of Debt Fast
That is until you use one of the best methods for paying off debt quickly.
When I used one of these four methods to pay off my debt, I saved $3,000 and became debt-free in just 6 months.
Keep reading to learn how you can do the same!
If you want to pay off your debt quickly while saving tons of money, you must make a plan.
For instance, how much debt do you owe and what is the best method for paying off your debt?
These are the four best methods to get out of debt fast:
- Debt Avalanche Method
- Debt Snowball Method
- Debt Consolidation
- Balance Transfer
Explore each option to find the best fit for you!
Let’s dive in.
1. The Debt Avalanche Method
If you want to save a ton of money in the long run, you should absolutely consider using the debt avalanche method to get out of debt fast.
The avalanche method will save you thousands of dollars in interest costs by applying the majority of your repayment efforts towards your debt with the highest interest rate.
Here’s how it works:
- Make a list of your debts from biggest to smallest depending on interest rates
- Make your minimum monthly payments on all your debts EXCEPT the debt with the highest interest rate
- Put as much money as you can afford towards debt payments on your debt with the highest interest rate until it is paid off
- Repeat this process until all debt is paid off
The biggest pro to the debt avalanche method is that you will save a lot of money in the long run.
The con is that your highest interest rated debt is often your largest, and thus may take some time to pay off; resulting in low satisfaction and motivation.
If you’re a fan of more instant gratification, the debt snowball method might be a better option for your debt payoff.
2. The Debt Snowball Method
The debt snowball method is very similar to the debt avalanche method except for one detail:
When you use the snowball method, you’ll pay off your debts in order from the least amount owed to the most amount owed.
- You’ll make a list of your debts in order from the smallest total due to the largest total due
- Continue to make your minimum monthly payments on all your debts EXCEPT your smallest debt
- Put as much money as you can afford towards paying off your smallest debt
- Repeat this process until you are debt-free
By knocking out your smallest debts first, it will feel like paying off your debt is simple because you’ll be able to pay off each debt quickly.
However, the debt snowball method will not save you money in the long run.
3. Debt Consolidation
One of the biggest setbacks to getting out of debt is the high-interest rates attached to most loans.
For instance, the average interest rate on credit cards is a whopping 17.5%!
And, it gets worse:
If you can only afford your minimum monthly payments, you’ll be paying off your debt for years without feeling like you ever make any progress.
That’s why debt consolidation can change your life and make getting out of debt a breeze.
When you consolidate your debt into one lump sum, you’ll drastically decrease your overall interest rate and will only have to worry about one debt payment.
As I said, debt consolidation is the perfect way to get out of debt fast if you have large amounts of debt and can only afford your minimum monthly payments.
- Apply for a low-interest personal loan in the amount of your total debt
- Once your loan is approved and funded, pay off all your debt
- Pay your personal loan each month (making larger payments than your minimum due will help you become debt-free even quicker)
I used a personal loan to consolidate my credit card debt and saved over $3,000 and was able to pay back my debt in half the amount of time than if I continued making minimum payments!
4. Balance Transfers
Let’s say you owe $5,000 on a credit card with a 22% interest rate.
When you apply for a balance transfer credit card with an introductory APR of 0% for the first 12 months, you can transfer your $5,000 debt to your new card to pay it off without paying interest.
This is a great solution if you can find a balance transfer credit card with a zero or low-interest rate but obviously doesn’t help otherwise.
And, referring to my example above, you will only benefit from paying off debt with a balance transfer IF you pay off the balance on your new credit card within the 12-month time-frame. Otherwise, you’ll be hit with an interest charge for the remaining balance.
To use a balance transfer credit card to get out of debt, follow these simple steps:
- Research balance transfer credit cards and ONLY apply to ones with a 0% introductory APR
- Once approved, transfer your debt from your old credit card to your balance transfer credit card
- Aggressively pay off your balance transfer credit card before the introductory APR expires
You can find tons of great balance transfer options on CreditKarma!
The four best methods to get out of debt fast.
Which debt payoff method are you going to use to destroy your debt? Leave a comment below!
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