How to pay down debt fast

Considering mortgages, auto loans, credit cards, student loans, and personal loans, Americans surpassed $17 trillion in debt in 2024. But not all debts are created equal! Let’s look at how to pay off debt quickly, which debts to pay first, and the best ways to handle multiple credit accounts. Additionally, we will share creative ideas to increase your income and savings.

Understanding the types of debt you have and how they affect your credit score can help determine your debt repayment plan. You should pay off high-interest debt and revolving debt first. Next, focus on student loans and auto loans. And finally, tackle real-estate debt last. Let’s look at credit card balances and personal loans, first.

Can you manage your debt on your own?

Ultimately, your debt-to-income ratio will determine how you should approach paying off your debt. If you feel confident that you can manage payoff on your own, there are several tried-and-true debt repayment options to consider.

If your credit card and personal loan balances are over 40 percent of your yearly income, consider financial guidance. An Empeople Financial Wellness Manager can help you manage your money better. Here are a few tactics they may suggest for quicker debt payoff:

The snowball method

With this method, you’ll start with your smallest debt first, paying as much as you can toward it while paying the minimum payment on others. Once you pay that initial debt off completely, take the amount you were paying and add this to the minimum payment of your next smallest debt. The minimum payment you’re making keeps growing like a snowball tumbling down a hill, but you are actually paying less overall.

The avalanche method

With the avalanche method, the debt with the highest interest rate is addressed first, while still paying the minimum on other accounts. Once you pay it in full, move on to the next highest interest debt, and so on.

This method is the most cost-effective and will save you more money in the long run, but can take longer to see results. If faster successes on paper motivate you, the snowball method may suit you better.

Consider debt consolidation

A debt consolidation loan or a low-rate balance transfer credit card can help lower your monthly payments. These options allow you to combine high-interest debts into one easy payment. With a debt consolidation loan, you have a set payoff date in sight and save loads of money in the long run.

Debt consolidation loans are especially helpful for paying off high-interest credit cards. They make it easier to escape the cycle of growing credit card debt. This is because your extra money can go toward paying off the loans.

Set a budget

Self-managed debt repayment takes strong willpower and a strict but realistic budget. If you find it hard to hold yourself accountable or manage your debts, a financial health partner can help!

Getting help from a professional can help you create a budget you can follow. They can make sure you live and spend within your means. They can also help you find creative ways to manage your monthly payments. They provide support while you stay in the driver’s seat, and they tailor every debt payment plan to your specific situation.

The key to making a budget is to keep it realistic and manageable. If you don’t allow yourself some flexibility, you may find yourself in the same situation again. Sticking to a budget is easier when you allow yourself to enjoy life’s pleasures: dining out, travel, shopping, hobbies, or whatever brings you joy. Practicing financial self-care is essential!

Many budgeting methods and theories are available, and one that works for one person might not work for another. Empeople’s Money Manager tool in our digital banking app is a great place to start by learning your spending habits. You can set up subaccounts to digitize the envelope method, use the 50/30/20 method, or work with a financial guidance expert to start fresh.

Get a side hustle

To pay off your debt faster, you might need to find extra income. This can be simple, even if it feels unusual for you. Look around your house, in your closets, and in your garage – are there any unused items you can sell or consign? What one person discards, another might value!

Rideshare or food delivery jobs can also bring in a significant amount of income. You can work as much or as little as you like. Use your extra earnings to pay off your debt and rely on your regular income for living expenses.

A warning: Delivery service jobs can affect your car insurance rates. They may also cause wear and tear on your vehicle. Be sure to consider all the pros and cons.

If delivery isn’t your cup of tea, a part-time job at a retail or grocery store is generally easy to secure. You can also find seasonal work around the holidays, or work-from-home customer service positions. Make sure to research and check if the employer is real before you engage in a work-from-home job.

When you pay off your debt or lower it to a manageable level, keep your side gig for a while! It’s a great way to save for holiday spending, build your emergency fund, or treat yourself for all your hard work. Paying off debt is a challenge worth celebrating!

Explore further debt relief options

If budgeting, earning extra money, and managing yourself aren’t helping to reduce your debt, consider other options. Debt settlement can help you lower outstanding bills and start fresh with your finances. However, this option is not right for everyone.

You should understand the impacts of choosing debt consolidation. Talk to an Empeople Financial Guidance Expert to make the best plan for you and your debt repayment situation.