5 Realistic Ways To Pay Off Debt

“Oh, just quit buying coffee every day. Then you can afford to buy a house.” Many of us have heard this phrase or some variation of it from time to time. What holds many people up on buying the things they need like a house or car is their total debt. Instead of cutting back on your coffee house runs that barely impact your budget, let’s look at realistic ways to pay off your debt faster.

1. Implement A Debt Strategy

First, you need to know how much debt you have. Write a list of all the personal loans, mortgages, auto loans, credit card debt, and anything else you owe money on. From there you can implement a debt strategy. A debt strategy prioritizes certain loans and creates a plan to pay off loans faster. There are two common debt strategies: the snowball method and the avalanche method.

The snowball method requires you to put extra money on the smallest loan you have. Once you chip away at that one with the extra money, you can pay it off faster than the rest of your loans. Then, you can build on your momentum and take the money you were paying on the smallest loan and apply it to the next smallest loan. By doing so, you create a “snowball” effect.

The avalanche method looks at the highest interest rate among all your debt. You put extra money towards that loan, even if it is the highest loan amount. By focusing on the interest of the loan, you can save time and money in the long run. Once that loan is paid off, you can take the extra money and apply it to the next highest interest rate loan. Get more details about these debt strategies here.

2. Debt Consolidation

Instead of having four to five different loans with different loan providers, consider consolidating all of your debt with a balance transfer. A balance transfer takes your outstanding balances from your other loans and moves them into one line of credit, usually a credit card. Usually, these are promotional offers from financial institutions. By moving your debt to them, they sometimes give you a 0% APR introductory rate for a set term, sometimes up to a whole year.

By consolidating debt and taking advantage of promotions like that, you can throw more money at the principal of the loan and avoid having a chunk of your monthly payments go towards interest.

3. Sell Some Stuff

We always have things in our house that we don’t use anymore. If you are looking for some extra cash to chip away at your debt, try decluttering your house. Whether you get enough items to throw a garage sale or have a few big ticket items, selling some of your gently used items is a great way you can earn some cash. One person’s trash is another’s treasure!

4. Pick Up A Part-time Job

Working a little bit extra throughout the week can earn more cash to put towards your debt. Or, if some of your skills can translate to freelance work, start working on picking up a few clients. These extra hours will bring home more dough that can be dedicated to your debt. Plus, this doesn’t have to be a long-term solution. Just working double time for a few months can set you up to be years ahead on your loans.

5. Maximize Windfalls

Sometimes, we find ourselves with a check we weren’t expecting, like a tax return, a job bonus, or maybe even winning the lottery. The extra money that suddenly appears can either go towards the next house project, a down payment on a vehicle or house, or it can go towards your debt. Spending this surprise money on debt isn’t the most exciting thing in the world but can really make an impact.

Paying off debt isn’t always a satisfying part of adulthood but it’s necessary if you took out loans for things like a house, car, or college degree. The best way to get more out of your paycheck every month is to make a plan to pay down your debt fast.