Pay Off Debt: Tools and Tips

Learn strategies for whittling down what you owe, and get insight into the best approach depending on your debt load.

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Written by Tiffany Curtis
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Edited by Kathy Hinson
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There are several options for paying off debt, and that can sometimes feel overwhelming. You might be thinking about a DIY strategy combined with budgeting and side hustles to increase your income. Maybe you’re contemplating debt consolidation or feel you need to check out debt relief options.

Here’s how to choose a strategy, and some tools and tips that can help you get out of debt.

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Assess your debt load

To a large extent, the best way to get out of debt will depend on how much you owe compared with your income.

Start by understanding whether you simply have too much debt. That gives you an idea of whether you can use a DIY strategy for payoff or should consider debt relief options.

The calculator below compares the amount you owe on key debt types, and compares it to your gross annual income (total pay before taxes or deductions).

Weigh DIY payoff methods

Debt snowball: With this strategy for getting out of debt, you focus on paying off your smallest balance first. Put all the extra money you can dedicate to debt payoff toward that account while continuing to pay the minimums on the others.

When that debt is wiped out, add the amount you'd been paying on it to the minimum payment on the next largest debt. The amount you’re paying on the focus debt keeps growing like a snowball getting larger as you roll it.

Debt avalanche: Focus on the debt with the highest interest rate first (while paying minimums on the others), then the next highest rate and so on.

This might save you money over the long run by wiping out the costliest debt first. But depending on the balance, it might take a while to zero out that first debt. If quicker wins would motivate you, snowball may be a better method.

Focus on high credit utilization: You could also focus on paying down your credit cards with the highest credit utilization — the highest percentage of the credit limit being used. Credit utilization plays a big role in your credit score, so in this case paying down debt could have a side benefit of helping your score.

Consider debt consolidation to get out of debt faster

Debt consolidation takes your high-interest debt, like credit card balances, and rolls them into one monthly payment, ideally at a lower interest rate. Some potential benefits of consolidating your debt include:

  • Lowering your interest rate.

  • Making your payments more manageable.

  • Shortening the time it takes to pay off your debt.

You might be able to use a balance transfer credit card or a debt consolidation loan, but note that you’ll likely need a good credit score to qualify. Each lender sets its own requirements, but generally scores of 690 or higher count as good credit scores.

It’s also possible to borrow from your 401(k) or to consider using some of your home equity to pay debt — but be aware that you risk your retirement savings and your home in those cases.

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Boost debt payoff with budgeting

If you feel like you don’t have enough money to cut down debt, getting clear on your budget may help. And keeping track of the money you have coming and going is always a good idea, no matter your financial goals.

Choose a system that works for you: There’s no one-size-fits-all budgeting system, and budgeting can be harder for some people than others. For example, being neurodiverse can come with unique financial challenges. But the good news is that there are several ways to budget, and you can find the way that works for you, like the zero-based approach, the envelope system or the 50/30/20 budget.

Use technology to make things easier: Technology can make budgeting easier by letting you keep track of all of your financial accounts, categorize your expenses and automate your payments. There are also several budget apps to help you stay on top of your money.

Lower your bills

Finding ways to reduce your monthly bills can help to free up more money to put toward debt payoff. And every little bit counts. Don’t be afraid to contact your service providers and see if you can negotiate a better rate on expenses like your cell phone bill or energy bill.

You may also be able to negotiate your bills for things like your car insurance, credit cards, gym memberships and cable service. Switching providers might get you a better deal. Do your research to compare the rates of different companies, be firm and don’t forget to make follow-up calls if needed.

Make more money

If you have the ability, making more money even in the short term can boost your debt repayment plan.

Consider getting a part-time job, selling gently used or unused items or using your skills to do freelance work. A side hustle like house sitting, driving for Uber or Lyft or even dog walking can fuel your progress.

Don’t rule out the possibility of increasing your current salary. Research and preparation may help you negotiate more money at your current job.

Don’t be afraid of debt relief

If you’ve tried budgeting, negotiating your payments and bringing in more cash, all to no avail, you might want to try debt relief. Debt relief can help you change the amount or the terms of your debt to lighten your financial burden, but it’s not for everyone.

You should also explore debt relief if paying off your unsecured debt like credit card bills, personal loans and medical debt within five years isn’t feasible or if your total amount of unsecured debt equals 50% or more of your gross income.

Debt management typically involves working with an accredited counseling agency to pay off your debt at reduced interest rates or with waived fees.

Bankruptcy — Chapter 7 and Chapter 13 are the two most common forms — involves either erasing most unsecured debt or being placed on a court-approved repayment plan for three to five years.

Debt settlement might suit people who don’t qualify for bankruptcy or who simply don’t want to file for it. You can try settling debt on your own by contacting creditors or you can hire a company to do it for you.

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