25 Smart Ways To Pay Off Debt Fast (A Complete Guide)

What would you do if you were walking in a forest and suddenly took a wrong step and fell into a hole?

Staying out of debt is crucial for achieving financial stability and peace of mind. Debt can be a double-edged sword, often providing immediate relief but burdening individuals and families with long-term financial stress.

Why Getting Out Of Debt Is Important

Here are several compelling reasons why it's essential to prioritize a debt-free lifestyle:

  1. Financial Freedom: Debt-free individuals enjoy greater financial freedom and flexibility. They are not bound by monthly loan payments or interest charges, allowing them to allocate their money toward investments, savings, and experiences that enrich their lives. This freedom empowers them to choose based on their aspirations and goals rather than their financial obligations.

  2. Reduced Stress: Debt is a significant source of stress for many people. Constantly worrying about bills, interest rates, and looming deadlines can affect mental and emotional well-being. Staying out of debt reduces this stress, promoting better mental health and overall quality of life.

  3. Savings and Investments: Individuals can allocate more of their income to savings and investments without a debt burden. This can lead to substantial long-term financial growth, as investments have the potential to generate returns and increase wealth over time. Whether it's saving for retirement, a home, or a dream vacation, being debt-free accelerates progress toward these goals.

  4. Improved Credit Score: A good credit score is essential for various financial transactions, from securing a mortgage to obtaining favorable interest rates on loans. Staying out of debt and managing existing credit responsibly can lead to an excellent credit score, which opens doors to better financial opportunities and lower borrowing costs.

  5. Avoiding the Debt Trap: Debt often begets more debt. Those who carry balances on credit cards or take out loans to cover previous debts can find themselves in a never-ending cycle of borrowing and interest payments. Staying out of debt prevents falling into this dangerous trap, safeguarding one's financial future.

  6. Enhanced Financial Security: Emergencies and unexpected expenses are a part of life. Without debt, individuals have a more substantial financial safety net to handle unforeseen challenges, reducing the need to rely on additional borrowing in times of crisis.

How To Pay Off Debt Fast in 25 Steps

Pay off debt fast
Image Credit: Andrey_Popov/Shutterstock.

Here is a list of ways to help you pay off debt fast in 2023. Be sure first to figure out how much debt you owe and list each amount down individually by categories:

  • Credit Cards (List out individually)
  • Student Loans (List out individually)
  • Auto Loans (List out individually)
  • Other (Personal Loans, etc.)

List the principal debt amount owed, the monthly minimum payment, and the interest rate for each debt.

1. Use The Debt Snowball

Made famous by Dave Ramsey, the debt snowball approach is the simplest way to pay off debt fast, no matter the depth of your knowledge about money.

Here is how the debt snowball works.

Suppose you have five debts:

  • Credit card: $1,500 ($52 payment)
  • Student loans: $12,200 ($110 payment)
  • Car loan: $9,500 ($95 payment)
  • Medical bill: $450 ($75 payment)
  • Owe a friend: $500 ($50 payment)

Step 1 is to order these debts from smallest to largest:

  • Medical bill: $450
  • Owe a friend: $500
  • Credit card: $1,500
  • Car loan: $9,500
  • Student loans: $12,200

You will make minimum payments on all five debts.

Then, make additional payments to eliminate the $450 medical bill first. Then, take that medical payment and apply that to the $500 that you owe your friend. Once your friend’s debt is done, move on to your credit card, car, and student loans.

For instance, making an extra $50 monthly payment on your medical bill eliminates the debt in four months.

The math: $75 minimum + $50 extra = $125 monthly.

You're done with a $450 medical bill in four months and off to your next debt.

    2. Debt Avalanche

    The debt avalanche is a powerful strategy that can be implemented to pay off debt.

    Unlike the debt snowball approach, the avalanche is based on interest rates, not the principal amount owed.

    To illustrate how the avalanche method works, let’s use the same example from above:

    • Credit card: $1,500 (18.99% interest)
    • Student loans: $12,200 (4.53% interest)
    • Car loan: $9,500 (3.61% interest)
    • Medical bill: $450 (1% interest)
    • Owe a friend: $500 (0% interest)

    All debts are ordered by interest rate, from highest to lowest.

    Using the Avalanche Method, we make additional payments to eliminate our high-interest credit card debt. Then, we apply that payment as an additional payment to our student loans, our second-highest interest payment.

      Which method works best will heavily depend on what motivates you.

      3. Cash Windfall

      Occasionally, you may find yourself with a nice-sized tax return. Or maybe you recently got cash from your wedding or from an inheritance.

      Either way, this sudden injection of cash into your checking account wasn't accounted for in your monthly budget, so treat it like it doesn't exist and immediately use it to pay off debt.

      For example, one Money Life Wax reader's wife got a performance bonus at work, and they used the $1,200 bonus to pay down a student loan.

      Don't treat the extra cash like it's free money to spend; use it to pay off your debt following your selected strategy. Whatever you do, don't be like the youngest lottery winner ever and blow through 1.8 million in a matter of months.

      4. Pay Yourself First

      Selecting a debt payoff strategy is simple. However, ensuring you guarantee you pay a specific amount towards debt each month can be challenging.

      Luckily, you can use the pay-yourself-first strategy.

      Here is how the pay-yourself-first strategy works:

      1. Figure out your monthly fixed expenses (bills).
      2. Calculate what is leftover from each paycheck (after bills).
      3. Determine how much from each check you will contribute to the debt.
      4. Once you get your paycheck, immediately pay off your debt with the predetermined amount.
      5. Whatever is left, you can spend.

      Most people do the opposite approach; they spend first. Followed by paying bills and lastly paying themselves (investing, saving, paying off debt).

      The pay-yourself-first approach is perfect for putting your debt first and saving more down the road!

      5. Rent a Room Out

      Housing is the big ticket item in most household budgets. As a general rule of thumb, no more than 30% of your income should go to your living situation.

      However, that is not always easy to reciprocate, especially if you live close to a metropolitan area for work. In that case, subletting a room in your home or apartment isn't a bad idea.

      Consider renting a room to earn some extra money to offset living expenses. In turn, you will free up money in your budget to use toward your debt. While living with another person might not be your idea of fun, it is nice seeing the living expenses drop.

      Pros of renting a room out :

      • $600 for a room x 12 = $7,200 annually
      • Split monthly utilities & internet
      • Easy to accept payment with apps like Cahapp and Venmo
      • Passive income

      6. Move Back Home

      Moving back home after college is bad enough, but you might have to consider moving back with your parents to pay off your debt fast.

      Depending on where you live, housing can cost you $12,000 (and likely way more) annually. Around 80% of millennials attribute student loan debt to being unable to buy a home, so staying with their parents to pay off their debt is really strategic.

      Ask if you can pay for a utility or offer to clean, stay at home, and use the money you plan to spend each month on housing to pay off your debt quickly. The faster you pay down your debt, the faster you can move out.

      (If anyone asks how you met your roommates, tell them they brought you home from the hospital 20-some years ago!)

      7. Downsize Your Home

      If you find yourself living in a home preventing you from getting ahead of your debt (aka house poor), it might be time to swallow your pride and temporarily downsize.

      Chances are your home has appreciated since you first bought it, so selling it will net you some income you can use to pay off debt. Live below your means for a year or two to clear your debt; then, you can buy a new home that is affordable!

      Another option is to move to a cheaper part of the country to reduce the cost of living. Just use this link to compare cities and the cost of living. Also, see #15 on how to leverage equity to pay off debt.

      8. Sell Your Car

      After mortgage and student loan debt, auto debt is step #3, ahead of consumer debt. Here are a few things about paying off your debt fast and car ownership:

      1. The purpose of a car is to get you from point A to point B.
      2. Your car's purchase price should never be more than 25% of your annual net income (If you make $40,000, your car's value should be $10,000 or less).
      3. If you want to pay off your debt quickly, selling your car is a quick way.

      Do the math:

      The average car payment is $350 for five years or about $21,000 over the life of the loan. Just cutting that in half and driving a more fuel-efficient car can save over $10,000 to go toward your debt.

      Related: Car Buying Guide

      9. Adjust Your Insurance

      Insurance is one of those fixed expenses we need, but we forget about it once we sign the documents.

      But if you're looking to pay off your debt fast, you need as much money as possible to make those extra payments. Shopping around for better insurance packages is a quick way to get some money back each month.

      Insurance companies are always looking for business, so don't be afraid to shop around every year or use something that does it for you:

      10. Cancel The Gym Membership

      The average adult who has a gym membership pays $72 per month. Save $865 per year just by canceling your gym membership.

      Take the extra $72 and use it to pay off your debt. Once you are debt-free, then you can get a gym membership again. There are plenty of ways to stay fit and not have a gym membership.

      Try the following:

      1. YouTube workouts
      2. Fitness apps
      3. Community gyms
      4. Run outside
      5. Join exercise groups
      6. See if work will pay for your membership

      11. Stop Eating Out

      Make a pact with yourself regarding eating out: I will not eat out until I pay off $1,000 in debt.

      If eating out is something you enjoy, make it a reward each time you pay off your debt. It is amazing how fast you will start paying off your debt when you use eating out as a reward.

      Adults spend $18,000 per year on non-essentials, most of which come from food and drinks. Cutting back on your eating and drinking habits will help you pay off your debt quickly and even get in better shape!

      12. Cut Your Credit Cards Up

      Cut up the plastic that got you into debt in the first place!

      If you're someone who is paying off debt because you overspent, it is time to say goodbye once and for all to those credit cards.

      In fact, even if you're paying off debt that wasn't acquired through spending, a good practice when becoming debt-free is removing all temptation to spend.

      The simple act of physically cutting up your credit cards will give you the upper hand and motivation you need to pay off your debt quickly!

      13. Work Backwards To Pay Off Debt Faster

      When it comes to changing your mindset on how you think about money, sometimes it starts with the unique approach of working backward.

      For example, let's say you want to run a half marathon. Now, work backward and devise a plan to get you there…

      • How much will you need to run to get there?
      • What will you need to eat?
      • What will you adjust with your time?
      • How often will you train?

      This same approach can be used when it comes to paying off your debt. Simply start with a target date and work backward!

      14. Use Apps To Help You Pay Off Debt Fast:

      Perhaps you have heard of Qoins, but have you ever heard of Trim or Truebill?

      Trim and Truebill are apps that basically help you save money! Here is how they do it:

      • Negotiate bills (think cell phone, insurance, internet, etc.)
      • Cancel unused subscriptions
      • Look for better deals

      The key difference is that Truebill takes 40% of what you save and Trim takes 33%. Either way, you're saving and both offer free versions!

      Truebill – Personally, I used this to save $1,000 per year on car insurance (I actually called my current provider and negotiated over the phone). It has an app with a free and paid version.

      Trim – Free to sign up, no app – online version only.

      What About Spare Change Apps?

      Qoins and Acorns are spare change apps that help you pay off your debt without even thinking about it. Here is how they work:

      1. You link your cards to the apps.
      2. You decide on a goal, for example, paying down your student loans.
      3. Every purchase you make gets rounded up to the nearest dollar
      4. As your round-ups accumulate, they're used to pay off your debt.

      Qoins – designed explicitly for debt.

      Acorns – designed to invest round-ups, but you can cash out at any time, and then use that money to invest!

      1 acorns

      15. Use a Heloc

      Leverage your home's equity to pay off your debt (wait, what?)

      Using a HELOC to pay off debt is unconventional, but in certain situations, it is ingenious.

      HELOC works, as the saying goes, by “robbing Peter to pay Paul.” Essentially, you leverage your home's equity (which is dormant) to pay off high-interest debt – such as student loans or credit cards – which saves you time and streamlines the process.

      For a step-by-step guide, use this link: How I Made a $40,000 Student Loan Payment With A HELOC.

      16. Start a Side Hustle

      When it comes to getting out of debt, paying off debt revolves around two concepts:

      1. Making money
      2. Not spending money

      Both are designed to help you pay off your debt faster to avoid interest charges. In 2023, making money online or with a side hustle has never been easier.

      You can start a blog, ride-share, do deliveries or work online in some capacity. See this list of 50 Side Hustle Ideas to help you get started!

      17. Make Money Fast

      Use your free time to make money on the side to pay off your debt quickly. Next time you're sitting on a bus, riding the metro, or doing your best to stay awake at work, complete a survey.

      Maybe those aren't options for you, but there are plenty of ways to make $500 extra each month, check out this list here.

      18. Ask for a Raise

      On Monday, walk into your boss's office and ask them for a raise, and if they don't do it, tell them you're quitting. 

      (No, wait… just kidding, don't do that…!)

      The quickest way to make more money is to ask. In most cases, the worst thing that can happen is you will hear the answer, “No.”

      But what if you hear yes? Take your annual raise or newly acquired pay raise and roll all of it into your debt snowball/avalanche plan!

      See also, How to Ask For A Raise!

      19. Stay Focused

      The easy part is living on a budget and picking a strategy to pay down your debt. The hard part when it comes to paying off debt?

      Staying focused and disciplined.

      Managing money is all about behavior. The natural human tendency is to get excited about something. But like many things we get excited about, as we progress on our journey, sometimes we might lose our focus.

      To help you stay focused, you must create a really big why for getting out of debt. For example, maybe you will take one trip a month for a year after you pay off all your debt!

      20. Stop Comparing Yourself

      Don't compare yourself, and stay off social media.

      You might be wondering why this has to do with you paying off your debt fast, but this could be more important than any debt strategy because finances are mostly behavior.

      If you are on social media platforms and you're constantly comparing what you have (or don't) to others, it will be harder for you to stick with your plan to be debt-free. Learning to say “no” is a big part of becoming debt-free, and comparison sometimes makes us say “yes” instead.

      Learn how to stop comparing yourself financially here.

      21. Eat Less Food

      Want To Know How To Pay Off Your Debt Fast?

      Go on a diet and stop eating so much; not kidding. This might sound extreme, but being debt-free when it is estimated that 300 million have debt is also extreme.

      Sometimes, we might need to adjust some things in our lives to get the desired results. Not only will cutting back on our caloric intake help us with our fitness levels, but it will also help us save money at the store.

      Avoiding processed foods is typically less expensive, and with the average household spending $12,000 per year on food, meal planning can help you save money to use towards debt each year.

      22. Make Gifts

      When you begin to assess your debt, you might find that your consumer spending spikes during the summer and around holidays.

      Between birthday parties, Christmas, and other holidays, it is easy to fall off the budget wagon and start spending more on credit cards.

      But what if you're someone who loves to give gifts? It might be time to make some gifts if you're serious about paying off your debt.

      Simple gift ideas you can make:

      • Mason jar candles
      • Photo books
      • Wooden coasters
      • Personalized items (people love seeing their names)
      • Bulk items split into mini-gifts
      • Wreaths
      • Homemade soap

      23. Assess Wants vs. Needs

      By now, you have realized that most of these steps are designed to help you free up money or reduce expenses so you can make extra payments toward your debt each month.

      Making cuts to your budget is one step, but ensuring you're not spending your money on things you don't need is the next.

      Thoroughly assess a want vs. a need:

      Need Want
      – Transportation – New luxury car
      – Food & Shelter – Luxury apartment & eating out
      – Clothes – Designer fashions every season

      24. Shop Online 1X per Month

      Returning to the whole wants vs. needs debate, one-click shopping has most likely made your life easier and more complicated regarding money.

      The sheer fact we can grab our cell phone and buy whatever we may want in a matter of a few clicks is convenient… and conveniently scary.

      To help you curb your spending online, only check out 1x per month from all your online shopping websites. Simply add items to a car all month and check out on a planned date. You will limit impulse buys and things you truly don't need.

      Adopt the mindset that:

      **If you need something bad enough to go to the store to get it – then you need it**

      25. Stay Out of Debt

      The best way to pay off your debt is to never get into debt in the first place. Whether you recently became debt-free or you don't have any debt, do your future self a favor and stay out of debt.

      You can avoid most debt by using credit cards and buying cars strategically. If you have student loan debt, once you pay it off don't make the mistake of taking more loans out unless you do the cost analysis of the potential raise.

      Bonus: How to Track Debt Payoff

      Now that you have a complete guide to paying off your debt fast, the real trick is to stick to it so you can get debt-free like this family!

      Just like monitoring any habit – what you eat, what you say, how much you pay off – it starts with tracking. Luckily, the internet and your cell phone have made this really simple.

      Track your debt payoff with apps like Mint (free) or Personal Capital. If you don't like using apps, you can go old school with an Excel sheet. Some will even create a graph and hang it somewhere in their kitchen!

      Now crush some debt and live life on your terms!

      Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $200,000 in student loans with his wife in less than four years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post and more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their chocolate lab named Morgan, working out, helping others with their debt and recommend using Personal Capital to track your finances.