Tools to Get Out of Debt Faster - picture of hand sticking out of hole in sand at beach

Ready to Get Out of Debt? These 3 Tools Can Help You Do It Faster

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Are you ready to get out of debt?!?

Congratulations! Making the decision to destroy debt is the first step to designing the life of your dreams. I’m so excited for you to get started! You can do this.

Now that you’ve made the decision , you’re probably wondering if there’s anything that can help you get out of debt faster. Take this question from a reader named Amanda, for instance:

Amanda: Hi Holly and Greg! Thank you so much for your inspiring blog. It has pushed me to take my money more seriously so I can travel more, and I want start paying off my debt right away. What tools or apps do you recommend to get started?

Amanda, you’re a freakin’ rockstar! I love, Love, LOVE that you’re ready to tackle your debt… and I want to help you get rid of this mess as quickly as possible. Whether your goal is to travel the world or to simply stop living paycheck to paycheck, destroying your debt will help you get there. So, what do you say? Let’s do this thang!

Paying Off Debt – The Logistics

Before we get to the tools, let’s talk a little bit about how to destroy your debt quickly. So, debt is a nasty little gift that keeps on giving – giving you financial nightmares, that is. Owing money to others is bad enough, right? But, one of the biggest reasons debt sucks is that you don’t just pay back the money you borrowed; you have to pay back interest too! That interest keeps building and building, costing you more and more, which means it takes you longer and longer to pay back what you owed originally. Eventually, you end up paying waaaay more than the sales price, so you’re spending considerably more than you thought you did in the first place. Ugh.

When you get a bill for your debt, creditors always present you with a minimum payment. These minimum payments are structured to drag out the process for as long as possible. Doing so means you’ll pay more interest, making the creditor more money. In most cases, you can pay more than the minimum without being whacked with a fee. So, if you want to get out of debt quickly, you need to make payments that are considerably larger than the minimum payments on your monthly statements.

You still with me? Good.

2 Debt Repayment Methods to Try

There are a couple of methods we suggest using to get out of debt fast. One is called the Debt Snowball; the other is the Debt Avalanche. These two repayment strategies organize your debts so you’re paying off one debt at a time. They also encourage you to use any extra money you have to speed up the process.

I think both methods work equally well, so just pick one and go with it. We’ve written extensively about each of them before, so I don’t want to go into too much detail here. That said, you can read all about using them using the links below:

3 Tools to Help You Get Out of Debt Faster

Now that we’ve covered how to get out of debt, let’s discuss some tools that can help you get out of debt even faster. Here are 3 of my favorites.

Balance Transfer Card

Back when I had some moderate credit card debt, I struggled to get ahead. I barely scraped up enough to make my minimum payments every month, which meant that a big chunk of my payments were actually going toward interest charges. Once I got engaged to Holly, she wasn’t having it.

After deciding to get out of debt, the first thing I did was move my credit card debt to a balance transfer card with 0% interest. Instead of paying gobs of interest every month, my payments were now being applied to the principle. So, instead of falling further behind, I was actually getting ahead. That gave me hope and helped me build momentum to pay it off!

If you’re looking for a great balance transfer card, I’d consider the Citi® Diamond Preferred® Card. This card offers 0% APR on balance transfers for 21 months after the date of your first transfer, which gives you plenty of time to pay them all off. (After that, the rate is a 13.74%-23.74% variable APR.) If you’d like to learn more about specific balance transfer cards, use the link below.

Related: Best 0% APR and Balance Transfer Cards This Year

Personal Loan

Wait a minute? Aren’t we trying to pay off debt here? Yes. Yes, we are.

Using a personal loan to refinance high-interest debt is another helpful tool for paying off debt faster. It can also save you oodles of money. Credit cards typically carry interest rates above 10% APR. In fact, many cards may be charging you a rate around 18-24% APR. That’s enormous.

By refinancing high-interest debt into a personal loan at a lower rate, you might save thousands of dollars in interest. Places like SoFi offer fixed rate personal loans starting at 5.99% APR* (with AutoPay). If you’re paying more than 10% on your debt, you can see where it pays to check them out. Learn more here.

Monthly Budget

Last but not least, to get ahead of your debt, you must learn how to handle your money. That means using your money wisely and creating a plan to do so. The best way to do that is to start a monthly budget.

When you have a plan for your money, you create less waste and more savings. Budgets are the cornerstone of sound financial management, and – frankly – I think they get a bad rap. Many believe that budgets are too “restrictive.” In reality, budgets help set your dollars free by using your money more efficiently. They are simply a money plan for the month, helping you realize how much you have coming in and going out.

Combining your new budget with either the Debt Snowball or Debt Avalanche is a powerful way to destroy debt fast. Personally, I think a zero-sum budget provides you with the most control over your money. They are fairly easy to create, and you can do it with just a pencil and paper. Tracking your spending is also an important skill that helps you understand exactly where you actually spent your money during the month. For a program that helps you automate both, I recommend checking out Tiller.

Final Thoughts

Personally, I think it’s best if you use a combination of these tools. Start by creating a budget and choosing your preferred method of debt repayment. Then, depending on the type of debt you have and how quickly you can pay it off, consider transferring your debt to a card or personal loan.

Remember, all the tools in the world won’t help unless you change your habits. You can’t simply move all your debt to a balance transfer card, keep spending like crazy, and hope to make a dent. But if you stick to your new budget and follow a solid debt repayment strategy (like the Debt Snowball or Debt Avalanche), using a balance transfer card or personal loan is a good way to get ahead that much quicker.

Congratulations on your decision to become debt-free! Good luck. I’m cheering for you!

 

*SoFi Disclaimer

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4 Comments

  1. Budgeting is key. Before using a balance transfer credit card or a personal loan (which are both great strategies but both involve getting more credit) you need to get your basic budget in place. Once you can control your monthly spending then you can start to take advantage of those more advanced strategies.

  2. Of course, these tools can help you get out of debt, but you have to use them in the right way. Usually when a person gets into debt, they need to establish positive money habits before taking out a new loan or dealing with a balance transfer.

    I had horrible money habits that I improved while paying off debt without extra tools. Sometimes the tools are necessary, but oftentimes it requires developing a sense of discipline first.

  3. A monthly budget is so important! It’s funny what just having a plan can do for your finances. You start seeing all of those little transactions and ways you can work your budget to pay more debt!

  4. I think zero rate balance transfer cards are one of the best things created by the financial sector, provided one uses them responsibly. I do wonder whether it’s possible to transfer the leftover debt after the zero rate period expires…

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