Last Updated on November 26, 2020 by Emma
There are two main ways to pay off debt quickly; the debt avalanche and the debt snowball methods.
The debt avalanche involves listing your debts from the highest to the lowest interest rate, so you first repay the debt that has the highest interest rate. This method works well if you want to minimise the amount of interest that you pay on your debt.
The debt snowball method is a distinctly different way to get out of debt that is recommended by the financial guru Dave Ramsey. It involves listing your debts from the lowest balance to the highest balance and paying them off in that order. Although you are ignoring the interest rates in that model, Dave has found that it has better results. In Dave’s experience, the motivation you achieve from paying off the first small debt fuels the motivation you’ll need to get out of debt fully, by paying off the higher balances. In my personal experience, I’ve also found the debt snowball method to be in the most motivating and therefore effective way of paying off debt.
Disclaimer: This post contains affiliate links which means my blog earns a small commission if you use them, at no extra cost to yourself. This article does not give financial advice; it captures lessons from my experiences and research over the years.
So we’ve learned two methods for paying off debt, but how do you get your debt paid off quickly?
1. Start with a budget
The first step is to sit down with a pen and paper or a spreadsheet on your computer, and list your income and necessary expenses such as your food, rent, mortgage, lighting, heating, essential clothing, insurance, etc. That will then give you a good picture of how much money you have left to repay your debts, and which items of spending you can cut back on.
For example, if you are spending £1,000 on food each month, can you shop at a cheaper supermarket or buy the supermarket’s value product range to save some money and instead use it to pay your debts?
Dave Ramsey recommends building an emergency fund of $1,000 before attacking your debt. That way, you have a buffer to use if you face an emergency, rather than having to take out personal loans or get into more credit card debt. Keep your money safe in a separate bank account or in one of the many savings account options you’ll see on the market, so you will be less tempted to spend it. Just make sure you can access the money quickly in an emergency.
Once you are out of debt it’s a great idea to have savings accounts for any significant items of spending that you want to make in the future, for example, saving for a deposit on a home, or buying a car, or a present for your husband or wife.
For my top tips on saving money, you can read my article Tips to Start Saving Money.
2. Track your spending
Once you’ve set your budget, it’s critical to track your spending to make sure that you are sticking to your financial plan. There are a variety of ways of doing this, including:
- The envelope system – keep cash in an envelope for each type of expense. Once your food envelope is empty, you know you’ve reached your budget limit.
- Use a spreadsheet – keep an eye on your bank statement and update where you are against each budget line by updating the document throughout the month.
- Use a budgeting app – there are lots of great apps available that will communicate with your bank accounts and automatically track where you are against your budget. In the US, Dave Ramsey’s Every Dollar app receives excellent feedback from the people who use it. In the UK, YNAB (You Need A Budget) is one of the most popular and what’s more it’s free to college students for a year.
3. Increase your income
While your budget will help you to decrease your expenses, you can also make significant progress to pay off your debt fast if you increase your income by taking on a second job or potentially starting a side hustle.
You can read some ideas for how to do this in the following articles:
4. Switch your highest interest rates for lower interest rates
If you are paying a high APR such as 18%+ on credit card debt and you have the option to move your credit card balance through an interest-free balance transfer deal, then this is worth considering. If you do transfer credit card debt, it’s essential to continue to pay this down because even the best credit cards become interest-bearing with time.
In the debt snowball method, you would pay off your credit card balance as soon as it is the smallest debt on your list. With the debt avalanche method, you would pay it off as soon as it’s the highest interest rate of all of your loans.
Equally, if you fail to meet the minimum payments, it will damage your credit score, which could be a problem if you are looking to take out a mortgage in the future. Most providers use credit scoring to decide how much to lend; however, it is possible to find some providers who will work in another way, if you have a bad credit score. Typically repaying your credit accounts will improve your credit score over time.
If you’d like to find out more about your credit report, you may be able to register for a free look at your credit with a provider such as Experian.
5. Pay more than the minimum repayments
Just making the minimum repayments could see you making repayments for the rest of your life if you have debt that attracts a high interest rate. Regardless of whether you choose the debt snowball or the debt avalanche method, you will need to increase the repayments on the smallest debt that you are currently repaying or the one with the highest APR.
6. Pay off your debts before making non-essential purchases
If you are making good progress with your debt management plan it can be tempting to reward yourself by making some purchases; however, this is not the time for shopping sprees! Try to avoid temptation by not visiting shopping malls, uninstalling shopping apps that you use regularly and consider giving your credit cards to someone you trust to look after; perhaps your husband or your wife if they are good with money.
7. Get your partner on board with your ‘get out of debt’ plan
Becoming debt-free is so much harder if your partner is not on board. In the worst-case scenario, as fast as you pay off your debt, they could be taking on more debt. Take the time to sit down with your husband, wife, girlfriend, boyfriend or other partner and explain why this is important to you and what your vision for a debt-free life looks like; does it mean more travelling, more time at home, or something else?
When partners have a shared vision of why becoming debt-free is important, they are much more likely to stay the course with their debt management plan.
8. Shop around for the best car insurance and home insurance deals
When you are paying off debts, shopping for the best deals is a great way to save money. Price comparison sites for your essential insurance could save you a significant amount of money, so make sure to check out their quotes when your car insurance and home insurance is due for renewal.
9. Avoid car loans
Once you are on the path to repaying your debts, it’s important to take control of your situation and avoid taking out further debt. For example, if you need to buy a car, avoid taking out a car loan, also known as an auto loan. You’ll be paying interest charges at the same time as the car is costing you money and depreciating. Instead, try to save up so that you can buy a modest second-hand used car for cash. Yes, it may not be your dream car, but once you are out of debt, you can save up to buy that in the future if it is still important to you. It feels great knowing that the car is yours, rather than financed with an auto loan.
10. Sell unnecessary possessions
The typical person has at least £1,000 of stuff hanging around their house that they no longer need. By simply listing this on a site like eBay, your local community Facebook group, Gumtree (UK), or Craigslist (US), you could earn some much-needed cash to put towards repaying your debt.
Some people who are in substantial amounts of debt go as far as selling and downsizing their houses and cars to get out of debt faster.
11. Understand how and why you got into debt
All of these techniques to get out of debt fast are great, but the whole exercise is pointless unless you get to the root of why you got into this situation in the first place. With this insight, you can make lasting changes, so this never happens again.
How deflating would it be to go to all of the effort to clear your debts only to find yourself in the same position, a year or two down the line?
You have the power to change your mindset around debt completely. For example, you could:
- Close your credit cards and agree never to buy anything on finance every again; this is Dave Ramsey’s model. The only debt he believes is acceptable is a 15-year mortgage on your house.
- Stick to the routine of creating a monthly budget and tracking your spending each month.
- Develop the habit of saving for items that you don’t have the cash for.
- Wait 24 hours before buying something that you feel tempted to buy! You could wait as long as 30 days for higher value items such as a car.
- Join a community of like-minded people who are staying debt-free to keep you motivated.
- Listen to people like Dave Ramsey, who encourage sensible ways to manage your finances. He has a free YouTube Channel, podcast and Facebook account. You can also read his books:
What about student loans?
The way to treat a student loan depends on where you live. In the US, student loan debt is far more onerous than the UK system, so Dave Ramsey’s advice is to include it within your debt snowball. In the UK, student loan repayments do not attract the same high levels of interest and your repay them as your income reaches certain levels. For these reasons, some people decide to make investments rather than repay them early.
Other people still decide to pay off their student loan early because they want to be completely debt-free; it comes down to personal preference.
What is the fastest way to pay off debt?
The fastest way to pay off debt is to cut your expenses while increasing your income, so you maximise the amount of money that you have to repay your debt.
Can you pay off debt too fast?
Arguably if you do not leave yourself with enough money to lead an enjoyable life where you can pay for at least necessities, then you are trying to pay off your debt too quickly. If your debt repayments take many years, then you will need to find a system that keeps you motivated, but also allows you to live a life that brings you joy in the meantime. The good news is that there are so many things we can do for free or very little money, such as walks in beautiful parks, exercise, learning a new hobby, reading a good book from the local library, volunteering etc.
How do I find the best balance transfer credit cards?
A simple search on google will help you find some good options for balance transfer credit cards. Here are some great resources for readers in the UK:
- Balance Transfer Credit Cards article on MoneySavingExpert
- MoneySuperMarket comparison site
What if I lose my job and can’t repay my debt?
A job loss is a very stressful situation to experience. You’ll need to focus on keeping a roof over your head, food in your cupboards and heating on. You can speak to your creditors to see if you can negotiate a payment holiday due to hardship, while focussing your efforts on finding a new job. You could also explore ways to earn money online at home and some side hustles.
What is an APR?
APR stands for Annual Percentage Rate, and it gives borrowers details on how much their debt will cost them. Generally, the lower the APR, the less the debt will cost you over time. However, the APR only tells you the interest rate that the finance company will apply to your account. The APR won’t factor in any late payment fees or any payment protection insurance that you may have selected, so it’s essential to read your credit agreement before signing anything.
Where can I get free help with my debt?
There are many charities such as Citizens Advice Bureau, National Debtline and StepChange that provide free information and resources to individuals who are struggling with their debt. They also offer details of debt management options for individuals who do not have the means to meet even their minimum repayments such as:
- A debt consolidation loan to bring all of the debts into one loan account with one, lower repayment
- Individual voluntary arrangement (IVA)
- Debt relief orders
If you are considering a debt management plan such as an IVA, it’s essential to get robust financial advice, so you understand the implications of this financial decision. For example, with an IVA, it will stay on your credit report for six years.
What are your experiences with debt?
What are your experiences with debt and getting out of debt?
Are you a fan of the debt snowball or the debt avalanche?
Let us know in the comments.
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22 thoughts on “How to Pay off Debt Quickly: Top Tips”
Hello Emma, this is very important to all of us because we all have bills to pay and we have to manage our resources to be able to foot these bills. Managing your spending is one of the most effective ways and so far I have been making sure there is no irrelevant spending, there has been some extra cash for me to save for something else.
Thanks for your message Lawson. Yes, keeping track of spending is very important to getting debts paid off quickly. That coupled with finding ways to increase your income is a very effective strategy.
Hello Emma! Thank you very much for dropping this article on how to pay off your debt quickly. I’ve gone through it and it’s a really informative article and very elaborate. It contains valuable information all of us can relate with because we all have bills. Managing your spending may look like one of the easiest things to do but it turns out to be one of the most difficult. I’ve been a careless spender and that’s the reason I have lots of debt. Thanks to your article, I now know better and I’ll put these steps into action. Thank you.
This is great to hear Sophie! I wish you every success with your journey.
One thing is to collect a loan and the other thing is your ability to repay that loan. Debt is one of the most difficult thing to pay because because at that point in time you’ve forgotten how badly you needed that money. I’ve had so many experiences with debts so I usually do not borrow because it’s hard for me to pay back.
Thanks for sharing your experiences Philebur. I agree that it is better to avoid debt.
Dealing with debts can really be the biggest and most threatening thing to us. But knowing and acknowledging it and dealing with it from a proper stand point would always help us overcome it. What you shared here is really good and I appreciate it here. This is a good one here. Thank you for sharing with us. Thumbs up
Thank you for your kind message Darmi. I wish you every success.
These are very wonderful tips for me o start to make use of so that I can pay off my debt. We all know for those who went to college about that dreadful debt many people are made to have for a long time but I have been looking for ways to try to end mine and now you shared this good tip. I’ll definitely give it a go.
Thanks for your message Jackie. I wish you every success!
Thank you for this article, a lot of people will be needing this tip. How to pay off debt quickly, and the two methods you gave is very important, like a person needs to know the kind of debt to pay first in order not to accumulate too much interest rates, so starting from the highest interest rate to the lowest is actually cool, so I prefer this method to the debt snowball method, even though it has some motivating spirits
Hi Maureen, thanks for sharing your opinion!
Debt sometimes can be worrisome and very terrible if we don’t have a proper plan to get off our neck. I’ve learnt a lot from reading your article though I’m not on debt right now. It could come handy in the future. I would prefer the debt snowball method because I can easily clear my small debt step by step until I reach the most expensive ones. The first three steps you’ve discussed is very essential and important than the rest. When we can get the three right before adding others, it will quickly help to make us debt free.
Great share Kelvin. Yes I also find the debt snowball method to be more motivating than the avalanche.
Thanks Emma, this is an eye-opener, realy we need a proper strategy of settling our bills because as humans there are so many bills that we deal with on daily basis so this article is going to be very helpful, its a great lesson.
Musa, thank you for taking the time to send this message. I am so pleased to hear that you found the article helpful 🙂
Hello, I read your article and your advice on how to pay off debt quickly are helpful to everyone that has debts to pay or will have in the future. I’ve worked in the banking system for many years and I know that most of the people are interested to get a loan or credit card limit and we all face with debt in our life. I also have bought my house with a mortgage loan and my husband and I have credit cards limited approved, and I can say that the most important thing is to pay regularly our debs. I gave used both the ways that you recommend here for paying my debt, trying to close even the debt with a high-interest rate like credit cards, or short-term loans, but also when I earn a good sum of money from my jobs, I invest them to close my debts, even those with a lower interest rate, because the first year’s of paying calendar from the monthly payment mostly interests than principal, so I can pay a sum from my principal loan, better is for me to pay less interest in total.
thank you for sharing
Alketa, thank you for taking the time to leave this message. It sounds like you are focussing on the right things and paying off your debts. I wish you every success with that.
The techniques and guidelines that you cite on your website are very informative and can effectively offer a solution for many. Unfortunately, the poverty rate is constantly on the rise and many people are in debt.
I also prefer the “Debt snowball method” because it is more fun for me to see the list “shorten”. This is of course completely personal but I think the psychological aspect is also important.
I myself live in Belgium and I also have a lot of debts. Unfortunately, my ex has gone into a lot of debts (which I didn’t know about) and now I’m in trouble.
Fortunately, here in Belgium there is the “collective debt settlement” where all my financial problems are in the hands of a mediator. I only get € 125 ($ 146) every week to live on.
As a graduate in computer science, I am nevertheless very capable of arranging everything myself, but it is simply the case that you are obliged to step into that system if you would like to have a Pro Deo lawyer litigate.
I am also convinced that you may not take out additional loans because then you dig the well deeper and you certainly do not see any light at the end of the tunnel. I also keep all purchase tickets in order to keep an eye on my amount spent. And if possible I will also refund larger amounts. I am now divorced and I no longer have to count on the support of a partner.
Your site will make many think and that’s why it’s good that it exists!
Good luck with your website and in your further life!
Thank you for taking the time to share your story. I agree with you about the debt snowball method; it’s the one I prefer as well.
It’s interesting to hear about the system in Belgium and I wish you every success with making progress with your debts.
I have read the post and you offer some really amazing tips – I will start using a fixed budget. I am already tracking my expenses, but I have a hard time saying NO to some expenses. After reading your article, I see that is a must and what are consequences if I will not follow through with FIXED budget.
This is great to hear Vesna! Budgeting is a game-changer when you are trying to pay off debt.