Debt is a common and sometimes unavoidable part of life, but it can also be a major source of stress, anxiety, and financial hardship. Whether you have credit cards, student loans, personal loans, or other types of debt, paying them off as soon as possible can save you money, time, and hassle. But how do you get out of debt early? Here are some steps to help you achieve this goal.
1. Assess Your Debt Situation
The first step to getting out of debt early is to assess your debt situation, which means knowing how much you owe, to whom, and at what interest rate. You can use online tools, such as Experian, Credit Karma, or Mint, to access and review your credit report and score, which can show you your current debt balances, payment history, and credit utilization. ¹²³
You can also use a spreadsheet or a notebook to list all your debts, including the creditor, the balance, the minimum payment, the interest rate, and the due date. This can help you see the big picture of your debt and prioritize which ones to pay off first.
2. Create a Realistic Debt Payoff Plan
The second step to getting out of debt early is to create a realistic debt payoff plan, which means setting a specific and measurable goal, choosing a payoff method, and tracking your progress. You can use online tools, such as Bankrate, Investopedia, or Ramsey Solutions, to access and use debt calculators, which can help you estimate how long it will take you to pay off your debt, how much you will pay in interest, and how much you can save by paying more than the minimum. ⁴
You can also choose a payoff method that suits your needs and preferences, such as:
- The debt snowball method: This method involves paying off your smallest debt first, while making minimum payments on the rest of your debts. Once you pay off the smallest debt, you take that payment and apply it to your next-smallest debt, and so on, until you pay off all your debts. This method can help you build momentum and motivation, as well as reduce the number of bills you have to pay each month.
- The debt avalanche method: This method involves paying off your highest-interest debt first, while making minimum payments on the rest of your debts. Once you pay off the highest-interest debt, you take that payment and apply it to your next-highest-interest debt, and so on, until you pay off all your debts. This method can help you save money and time, as well as reduce the amount of interest you pay over time.
You can also track your progress by using online tools, such as Debt Payoff Planner, Undebt.it, or Pay Off Debt, which can help you create and manage your debt payoff plan, as well as monitor your balances, payments, and savings.
3. Adjust Your Budget
The third step to getting out of debt early is to adjust your budget, which means allocating more money toward your debt payments, while reducing your expenses and increasing your income. You can use online tools, such as EveryDollar, YNAB, or Personal Capital, to access and use budgeting apps, which can help you plan and track your income and expenses, as well as set and achieve your financial goals.
You can also reduce your expenses by cutting back on unnecessary or discretionary spending, such as eating out, entertainment, or subscriptions. You can also save money by shopping around for better deals, negotiating lower rates, or switching to cheaper alternatives. For example, you can save money on your phone bill by switching to a prepaid plan, on your cable bill by cutting the cord, or on your insurance bill by raising your deductible.
You can also increase your income by working more hours, taking on a side hustle, or selling your unwanted items. You can also earn money by taking surveys, doing tasks, or testing products online. For example, you can earn money by using online platforms, such as Swagbucks, InboxDollars, or UserTesting, which can pay you for your opinions, feedback, or actions.
4. Use Extra Money Wisely
The fourth step to getting out of debt early is to use extra money wisely, which means putting any windfalls, bonuses, or refunds toward your debt payments, instead of spending them on other things. You can use online tools, such as SmartAsset, NerdWallet, or The Balance, to access and use tax calculators, which can help you estimate how much you will get back or owe in taxes, as well as plan how to use your tax refund.
You can also use extra money wisely by using the 50/30/20 rule, which is a budgeting guideline that suggests allocating 50% of your income to your needs, 30% to your wants, and 20% to your savings and debt payments. However, if you want to get out of debt early, you can adjust this rule to suit your situation, such as allocating 50% to your needs, 20% to your wants, and 30% to your savings and debt payments.
5. Consider Debt Consolidation or Refinancing
The fifth step to getting out of debt early is to consider debt consolidation or refinancing, which are ways to combine or replace your existing debts with a new one, usually with a lower interest rate, a lower monthly payment, or a shorter repayment term. You can use online tools, such as LendingTree, Credible, or SoFi, to access and compare debt consolidation or refinancing options, such as personal loans, balance transfer cards, or student loan refinancing.
However, debt consolidation or refinancing are not for everyone, and they may not always save you money or time. You should consider the pros and cons of each option, such as:
- Debt consolidation: Debt consolidation can simplify your debt management, lower your interest rate, and reduce your monthly payment. However, debt consolidation can also extend your repayment term, increase your total cost, and affect your credit score.
- Debt refinancing: Debt refinancing can lower your interest rate, shorten your repayment term, and save you money. However, debt refinancing can also increase your monthly payment, incur fees or penalties, and require a good credit score.
6. Seek Professional Help
The sixth step to getting out of debt early is to seek professional help, which means getting advice, guidance, or assistance from a qualified and reputable expert, such as a financial planner, a credit counselor, or a debt relief company. You can use online tools, such as SmartAsset, NFCC, or ACCC, to access and find professional help, such as financial advisors, credit counselors, or debt management plans.
However, seeking professional help is not a magic bullet, and it may not always solve your debt problems. You should be careful and cautious when choosing a professional help, such as:
- Financial planner: A financial planner can help you create and implement a comprehensive financial plan, which can include your budget, savings, investments, retirement, and debt. However, a financial planner can also charge you fees, commissions, or conflicts of interest, and may not be licensed, certified, or fiduciary.
- Credit counselor: A credit counselor can help you review your financial situation, provide you with education and resources, and enroll you in a debt management plan, which can lower your interest rate, waive your fees, and consolidate your payments. However, a credit counselor can also affect your credit score, limit your credit access, and charge you fees or hidden costs, and may not be accredited, certified, or nonprofit.
- Debt relief company: A debt relief company can help you negotiate with your creditors, settle your debts for less than you owe, or file for bankruptcy, which can reduce your debt burden, stop collection calls, and protect your assets. However, a debt relief company can also damage your credit score, expose you to scams, lawsuits, or taxes, and charge you high fees or upfront costs, and may not be licensed, regulated, or legitimate.
Conclusion
Getting out of debt early can be a challenging and rewarding goal, but it also requires knowledge, skill, and discipline. By following these steps, you can learn how to get out of debt early, and enjoy the benefits of being debt-free, such as saving money, reducing stress, and achieving your financial dreams. Remember, getting out of debt early is not a one-time event, but a lifelong commitment. Happy debt-free living!