If you are asking yourself, “How can I pay off my debts quickly,” you are on the right track. The quickest way to retire your debt is to use an accelerated debt payoff plan. Here are the following steps: 1) determine what your total debt payment is now 2) sort your debts from highest interest rate to lowest 3) continue to make the same total payment amount except pay minimum payments on all debts with the exception of paying as much possible toward the highest rate debt, then 4) once the highest rate debt is paid off apply those new savings to the next highest rate debt and so on.
Use this debt restructuring calculator to determine the interest and time saved using this ‘roll-over’ technique, along with the potential increase in savings once all the debts have been paid off. The calculator will sort the debts for you when completing the analysis. You may also apply an extra amount to the total payment to accelerate debt payoff even further.
Getting Out of Debt Faster With an Accelerated Debt Payoff Plan
Accelerated payoff of loans can help save you hundreds or even thousands of dollars. A plan can also get you out of debt faster, which means your income will eventually be freed up for investments and your future. Here’s how to start your plan:
- Put $500 in Your Emergency Fund: Putting some money aside is important since it ensures you won’t be dipping into your “debt repayment money” every time a problem arises.
- Make a Budget: To determine how much money you earn and save, you need to run the numbers. Use our calculators to create a budget showing how much you earn and how much you spend. On your budget, circle expenses you can cut or reduce.
- List Out Your Debts: Write out your debts from most expensive to least expensive, with high interest rates listed near the top. The top loan is the loan you should pay off first. Set up automatic payments so the rest of your loans are paid on time with the minimum payment applied.
- Look for Ways to Save on Interest: If you have credit card debt, inquire about transferring balances or negotiate to have your interest rate temporarily lowered. You can use Money Help Center calculators to determine whether consolidating or transferring loan balances could help you get out of debt faster.
- Cut Unnecessary Expenses: Find ways to cut expenses by clipping coupons, dining in more, taking a bagged lunch and getting rid of expenses that don’t add to your quality of life. While you want to keep saving, remember to keep your savings reasonable. Cutting out a few things while keeping some of the items that bring you true joy is the key to making your budget sustainable.
- Bring in More Money: Whether you decide to sell some items, create a passive income by renting out space or take on a few extra hours of work per week, look for ways to earn more cash every month.
- Determine How Much You Can Pay Per Month: Look at your budget again. Add up how much you can save each month and up how much more income you can bring in per month. This total is how much you can apply to your current highest-interest loan. Once you’ve paid off that loan, move on to the one with the next-highest interest rate. Consider having your payment applied to your loan automatically. If you can’t see the money, you’re less likely to spend it.
- Keep Your Spending Habits Consistent: Once you’ve paid off all your loans, the same amount you’ve been putting toward your loans should go toward savings and investments. Do not take out new loans or run up a credit card balance again.
Money Help Center has free and unbiased calculators to help you create a budget and get out of debt faster and help you determine whether you should restructure your debt.