How to Pay Off $25K in Debt Fast

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If you owe money on multiple loans or credit cards, you may not realize exactly how much debt you're carrying. When you add it up, you may be surprised to discover you owe $25,000 or more—and you might wonder whether you'll be able to pay it off.

While $25,000 of debt may seem daunting, there are ways to pay it off once and for all. You can start by taking a serious look at your budget to see if you can cut back on your expenses, or earn extra income you can put toward your bills. You might also consider debt consolidation, which allows you to streamline your debts into a single loan, usually at a lower interest rate, and may make the debt easier to manage.

But the first thing you'll want to do is decide on a repayment timeline. Then you can develop a budget and payoff strategy that works with your income, lifestyle and desired timeframe.

If you want to pay off $25,000 in a year, your budget will have to be a lot stricter than if you set a goal to pay off your debt in two or three years. You'll also need to account for things like emergency savings or planning for upcoming life events when creating a realistic budget.

Once you have your timeline and a rough budget in mind, you can explore additional ways to pay off that $25K as fast as possible.

Reduce Your Interest Rates

Reducing the amount of interest you pay on loans and credit cards each month is an important step to take when paying down a mountain of debt. You can use the money saved on interest to make larger payments, which will help you knock out the debt faster.

There are a few ways to reduce your interest, depending on the type of debts you have.

  • Credit cards: If you're paying high interest on your credit cards, you can ask your card issuers for a rate reduction if your credit score has improved or if you're facing financial hardship.
  • Student loans: You may be able to refinance both federal and private student loans to reduce your interest rate. However, if you refinance federal loans to private ones, you won't be eligible for government programs such as income-based repayment. That's why it's important to consider how much you owe and whether refinancing could help you pay off the debt faster. If you're carrying federal loans with high balances, you may want to leave them as is in case you need to utilize such relief options.
  • Personal loans: Refinancing is also an option if you are paying down a high-interest personal loan. You may be able to save a considerable amount of money in interest and pay off your debt faster this way, which can ultimately help build your credit and improve your financial situation.
  • Auto loan: If your credit has improved since you first took out your car loan, you may want to refinance, especially if interest rates have dropped as well. Keep in mind, though, that refinancing to a new loan can extend your repayment period, which means you'll be in debt longer. If you're keen on paying off your debts quickly, make sure to ask your lender whether they charge a prepayment penalty for eliminating the balance before the end of the loan term.

You might also consider taking out a debt consolidation loan. With this option, you can use a personal loan to pay off your other debts, streamlining all your accounts into a single monthly payment. A debt consolidation loan will likely work best if you have good credit so that you can qualify for a low interest rate. Your goal is to reduce the amount of interest you're paying, so you want to make sure you'll be saving money before you apply for a personal loan.

How to Reduce Credit Card Debt Fast

If you're particularly struggling with high credit card balances, you'll want to bring them down as quickly as possible because credit cards tend to charge much higher interest rates than personal loans, student loans and other types of debt.

In addition to measures such as adding income and trimming your budget (see below for more), the following steps can help you get your credit card debt under control.

  • Stop using your credit cards. Putting yourself on a cash- or debit-only spending plan will reduce the risk of overspending since you're constrained by what's in your wallet or checking account. Then chip away at the current balances with whatever extra money you can find in the budget.
  • Pay more than the minimum amount due each month. It's important to pay at least the minimum payment each month to avoid a late payment, but just paying the minimum on all your credit cards will prolong your repayment period and increase the interest you'll ultimately pay. Come up with a plan for paying more on your cards every month (more on this below).
  • Consider a balance transfer credit card. Assuming you have good credit, you can look for a card that offers low-cost balance transfers and which has a 0% interest introductory rate. You can transfer high-interest balances onto the new card, and know that all the payments you make during the intro period are going toward your balance rather than interest. But keep in mind you'll likely have to pay a balance transfer fee, which typically adds 3% or 5% of the transferred amount to the total.

Utilize Debt Repayment Strategies

It helps to have a plan for how you're going to tackle your debt. Two popular approaches are the debt avalanche and debt snowball strategies. Although these methods are typically used to pay off high-interest credit cards, you can apply them to all types of debt.

Debt avalanche: With the debt avalanche plan, you make the minimum monthly payments on all of your debts except the one with the highest interest. You put as much as you can afford each month to that high-interest debt until it's paid off. Then, once that debt is cleared, you move to the second-highest interest debt and repeat the process until all of your debt is repaid.

Debt snowball: Under the debt snowball approach, you make the minimum monthly payments on all of your accounts except the one with the smallest balance. You prioritize the smallest debt, paying as much each month as you can, until it's paid off. After you've paid down that account, you apply the same approach to the second-smallest balance.

As you can see, the debt avalanche and debt snowball methods are similar philosophically, but differ in practice. The avalanche method will likely save you more money over the snowball method, but the snowball method may be easier to stick to since it provides faster and more frequent gratification. It really comes down to your preference and which strategy fits your timeline best. In either case, you'll make faster progress and save more on interest than simply paying your monthly minimums on all accounts.

Earn Additional Income and Cut Spending

The fastest ways to reduce your debts overall are to earn more money and cut down on your spending. Even if your full-time job doesn't offer many opportunities to increase your hours, there are other ways to boost your income:

  • Pick up extra shifts at work or volunteer for overtime, if that's an option at your job.
  • Turn a hobby, such as making crafts or baked goods, into an income stream.
  • Pick up odd jobs through sites like TaskRabbit and Thumbtack.
  • Sell unused furniture or old household items.
  • Offer tutoring or personal assistant services.
  • Sign up for a ridesharing or personal shopping service (think Uber or Instacart).
  • Look for freelance gigs on Fiverr or Upwork.

Remember, you don't need to permanently change your work schedule or keep a side gig forever. But even a little bit of extra income each week can help you shrink your timeline for paying off that debt.

If you're unable to work additional hours, you can free up money by spending less. Once you start looking for ways to cut your budget, you'll be surprised at how many ways there are to save, including:

  1. Prepare all of your meals (and your morning coffee) at home.
  2. Buy clothes and other goods secondhand.
  3. Cancel any subscriptions you don't use (and maybe even some you do), such as newspapers, magazines, streaming services, gym memberships or paid apps.
  4. Ask your insurance providers for discounts to reduce monthly premiums.
  5. Clip coupons and use cash back services, such as Rakuten, when online shopping.

When you take measures to save money by reducing expenses, you may find that the habits you adapt while on your debt repayment mission stick with you even after all your balances are paid down.

How to Get Additional Help With Your Debt

Sometimes debt feels overwhelming and the prospect of coming up with a repayment plan on your own seems untenable. If that happens, you might consider contacting a credit counselor.

Credit counselors provide debt management advice and assistance in negotiating down your debts. Although creditors are not required to work with credit counseling agencies, many will because even a partial payment is preferential to default for you and the lender. A debt management counselor can negotiate with creditors to lower your total balance or your interest rate, making it easier for you to pay off the account. Debt management plans typically have three- to five-year repayment terms.

The downside of working with a credit counseling company is that your credit score may drop at first if you end up repaying less than you originally owed. You'll also likely have to close your accounts, which could affect your credit utilization ratio.

However, once you've entered a debt management agreement, you'll only have to make one payment a month to your credit counselor. They will then distribute the payment to all of your creditors. This can make repayment less stressful since you're no longer handling multiple accounts. Over time, you can rebuild your credit score through on-time payments and improved credit management habits, which your counselor can help you establish. To find a credit counselor, look for reputable nonprofit companies affiliated with agencies such as the National Foundation for Credit Counseling.

When financial difficulties are the cause for your increased credit card debt, financial assistance programs are out there that can help you get your head above water. National, state and local programs exist to help people in many situations handle things like rent payments, utility bill payments, food costs and child care expenses.

If your credit score has suffered because of your debt, you may want to sign up for Experian Boost®ø, which can help you raise your credit scores powered by Experian instantly. A strong score is essential for future financing opportunities, so you'll want to do everything you can to protect your credit even while paying off debt. You can also use Experian CreditMatch™ to find balance transfer credit cards if you want to reduce your monthly interest payments fast.