A lot of people want to pay off their debts quickly, but they aren't sure how to get started. To pay off debt fast, you need extra cash. In this post, we show you how you can find extra money in your budget so you can pay down your debt quickly.

Chances are if you want to get out of debt, you’ve seen a lot of tone-deaf advice. The number one suggestion? Cut out your morning coffee to save $40 per month. If saving $40 per month will solve your debt problem, you don’t have a debt problem.

For people with 10s or 100s of thousands of dollars in debt, this advice is more insulting than helpful. So how do you know if you have a debt problem?

Try this out - plug your debts and income into this debt to income calculator. If your result is 35% or higher, this advice is for you.

Strategy for paying off debt

To repay your debt quickly, there are 3 approaches you can take:

  • Cut back spending for extra cash to repay balances
  • Collateralize your debt. Sounds fancy, but simply means putting collateral behind your existing debts to reduce interest rates
  • Earn extra money so you have more income to pay back debt

The goal is to pay as little interest as possible.

One way to do that is by repaying your debts fast. For credit cards, that means paying more than the minimum. For regular loans, that means pre-payment.

The other way is by reducing the overall interest you pay directly, by trading in existing loans for better ones.

There is no silver bullet, so the method that works best depends on you. Some people may have an easy time reducing spending and no way to earn more. For others, the opposite is true.

Let’s illustrate this with an example from someone I know, I’ll call him Jake.

How to pay off $224,000 in debt

Jake’s business partner ran up hundreds of thousands of dollars in debt in his company, then fled the country with the money. Jake was personally responsible for much of the debt, and now owes $210,000 in loans at 7% interest for a total monthly payment of $2,438.28.

He has an additional $12,000 in credit card debt at 22.5% interest, for a minimum monthly payment of $480 (4% minimum payment amount).

If Jake made the minimum payments on his debts, he’d pay a total of $86,937 in interest over 10 years.

If, on the other hand, he increased his monthly payments by just 10%, he’d reduce that interest amount by $14,199. To accomplish that, he needs an extra $291 per month to go towards his debts.

Type Total Interest Time to Debt-Free Monthly Pmt
No Prepayment $86,937 10 Years $2,919
10% Prepayment $72,738 8 years 9 months $3,209
Difference $14,199 1 year 3 months $291

Here’s how Jake could scrape together that extra 10% per month to allow him to get out of debt more quickly, and save thousands on interest.

How to pay off debts by spending less

You’re already frugal, but you want to save even more money. That means making some tough decisions to reduce common expenses.

Here are 8 expenses you can reduce or remove to save hundreds of dollars per month. Even if you’re already frugal, you can save more.

1. Stop eating out

As of 2018, Americans spend more money on eating out than groceries [source]. The average restaurant meal costs $12.75, and home-cooked meals can easily be prepared for less than $3 per person. Eating at restaurants should be avoided entirely.

Here are 40 meals you can prepare at home for less than $3 per person. Cooking at home and eating leftovers saves both time and money, leaving more free time to earn more cash.

Worse than simply eating out, delivery services like DoorDash or GrubHub add even more fees to your food. Relaxing after work it can be tempting to skip the dishes entirely by ordering in. Let’s do some arithmetic to see why that’s a bad idea:

Delivery is a waste of money

real cost of delivery services

This is for delivery of two burgers from a local restaurant by DoorDash. Two things to point out. First, taxes. In our area, the sales tax rate is 9.5%. The tax rate on groceries? 0%.

Second, Fees. DoorDash charges a flat 11% fee to “Keep the platform running”.

Ordering from DoorDash costs an extra TWENTY percent in fees alone. If you’re in debt, DoorDash is an excellent way to keep yourself there.

Third, Tip. This amount goes directly to your driver, and is up to you. They recommend 10% or higher, adding yet another cost to delivery.

In total, this delivery costs an additional 35% on top of the cost of the food. The food itself costs almost $16 per burger - over 5x more than you’d pay if you cooked your own burger.

Item Delivery Cost Home Cooked Cost
Food Cost $31.60 $6.16
Taxes & Fees $6.20 $0
Tip $5.58 $0
Total $42.78 $6.16

Restaurants can amplify the costs of your meal by over 300% - delivery services add even more. Eating out is the enemy of anyone trying to pay off debts.

restaurant cost versus cooking at home

2. Buy bulk items that are on sale

Cooking for yourself can get meal prices down to $3 per meal, but cooking for yourself from bulk items takes that to another level.

These 10 recipes cost about $9 each to make, and can feed up to 6 people. Cost per meal: $1.50.

Saving money on food

Learning how to spend less on food can be a challenge. It’s also a chance to save hundreds of dollars to put towards paying your debts early. The average cost of food per person in the U.S. is $550 per month. Eating one of the most expensive things we do, so it’s also a great opportunity to save money through small changes.

If cooking isn’t for you, try cutting back on your single largest expense: rent.

3. Move to a less expensive area

When you look at your budget, you probably think of rent as a fixed cost. Moving is too much work, and finding a new place to live takes too much time. Let’s see if that’s true.

Location Rent Cost (monthly) Commute Cost Commute Time
Downtown $1,400 $0 (walk) 20 minutes
Suburb (with parents) $0 $256.80 30 minutes

By moving to a cheaper area, chances are you’ll be exchanging convenience for lower costs. In some situations, commuting can be more expensive than living downtown. In other cases, commuting can save hundreds in rent payments.

To help you determine if moving further from your job would save you money, you can use a Commuter Cost Calculator.

real cost of commuting calculator

In this example, you’d spend a total of 10.5 hours driving in order to save $1156.80 of after-tax dollars. Factoring in an average tax rate of 25%, that’s like earning an extra $1445 per month to put towards your debt payments.

I hear you saying, “I’d never move in with my parents, I can’t give up my freedom”. Yeah? How free do you feel with $100k in debt breathing down your neck every day? If you have the chance, swallow your pride and live rent-free. Your future self will thank you.

This argument can work in reverse. Many people don’t have friends or family to move in with, and endure long and costly commutes. For them, increasing rent but dropping the commute might save money.

4. Sell your car

Ride sharing programs like Uber or Lyft may be cheaper than owning a car. If you drive very little or own an expensive car this is more likely.

To find out if you could save money by taking ride sharing everywhere, use this calculator.

ride sharing cheaper than owning a car calculator

Yeah, that’s right. You might SAVE money by getting chauffeured you go.

Here are some some of the costs you save by not owning a car:

  • Vehicle cost (duh)
  • Insurance
  • Gas
  • Parking
  • Repairs
  • Maintenance
  • Value of your time when you drive
  • Time spent choosing which car to buy

You can see from the chart above that the value of time is one of the largest costs of ownership. If you enjoy the time you spend driving, or are a “car guy” this might be money well spent.

I’m not advocating that we should all go vehicle-free. Owning a car is convenient and fun, but if your goal is debt reduction, go with whichever method will save you the most money.

5. Replace all paid activities with free ones

We all do some type of recreational activities. Whether you’re a skier, golfer, reader, or gamer, you have to unwind somehow.

Sadly, these activities can be pricey. If you want to pay off your debt fast, you need to cut expensive activities from your life.

sport cost comparison chart

Prices vary for each sport as well based on how you play. Community center leagues are cheaper than professional ones, for example.

If you’re spending big on equipment or fees for your recreational activities, consider replacing it with a comparable free activity. Many sports offer free pick-up games in community centers, and used equipment can be picked up cheaply from stores like Play It Again Sports.

Almost all activities have a cheap or free alternative. Save money to repay your debt faster by reducing how much you spend on recreation.

6. Get any new items you need for free

If you want to get out of debt, shopping is the enemy. Spending money you don’t have on things you don’t need is just how millions of people end up in debt in the first place.

Sadly, things break. Eventually, you’ll need to replace something you have, or buy something new. When that situation arises, there is a free alternative.

Online marketplaces like Letgo or Craigslist have free or nearly free listings for almost anything you need. We’ve picked up furniture, cookware, appliances, clothing, baby supplies and more from these sites for next to nothing.

If it isn’t free, sometimes you can get big discounts from sellers. Most people assume you’re going to barter with them, so never offer full price.

free stuff online marketplaces

7. Cut your phone plan to the minimum

Most Americans overpay for their cell phone plans. If you’re with Verizon, AT&T or Sprint, you’re probably overpaying. If you want to save money to repay debts faster, stop wasting money on your cell phone bill.

Many companies piggyback off of other networks, so you end up paying way less for exactly the same service. Use a tool like Whistleout to find cheaper plans available in your area.

cheapest phone plans

Xfinity mobile, for example, uses the Verizon network but only charges $12 per month for a plan with 1Gb of data.

8. Cancel your web subscriptions

Fees from Amazon Prime, Spotify, or Netflix add up fast. Share an account with your friend or family members to cut back on monthly spending that could go to repaying your debt. If you cancel all three of these subscriptions, you can save over $300 per year.

cancel subscriptions to save money

With Amazon Prime, consider going without it altogether. Some Amazon customers have been noticing that shipping speeds are just as fast without Prime in larger cities. Why pay extra for the same thing?

How to pay back debts quickly by earning more money

There are more opportunities to do work on the side today than ever before. If you can read this post, you could be doing remote work on the internet. You don’t need to be a genius hacker - anyone can do it.

Even if you work for a salary or your hours are capped, the amount you earn is no longer limited. You can earn more money to pay your debts back faster.

gig economy model

Online options are great because there are no physical requirements. People with disabilities or health problems can still earn extra cash on the side. If you’re not electronically-inclined, there are options for you too.

Here are 5 side gigs you could start today to earn extra cash to repay your debt fast.

1. Drive for Uber or Lyft

Great if: You own an economical car and have free time

Requires: A vehicle with 4 doors that’s less than 10 years old

If you live in a metropolitan area, ride-sharing is a great way to earn extra cash to repay your debts. These programs pay well and have flexible hours, so you can work as much as you want during the hours you decide.

uber earnings by city

The programs pay well, too. Most drivers earn almost $20 per hour, with the highest earners working during “surge pricing”. To really cash in working for Uber or Lyft, work when the demand is highest. You can earn the most during major events like concerts or when people are more likely to be out on the town, like Halloween or St. Patrick’s Day.

uber income hourly

If driving is your thing, but you’d prefer to not have any strangers in your car, consider DoorDash or GrubHub. You’ll deliver food rather than people, and earn a similar amount of money.

Doordash earnings hourly

2. Write for blogs or businesses as a freelancer

If you’d rather work from home, you can earn extra cash to repay your debts faster by working as a freelancer.

Sites like Upwork allow you to create a profile and start making money without any prior qualifications. You can build up your portfolio at home for free, then start looking for contracts.

There’s lots of options for freelance work, but writing blog posts or manuals for businesses are great starting points.

freelance work opportunities to repay debt

When you start out, you’ll likely make around $15 per hour, depending on your skillset. As you improve, you can earn $40 or more per hour as a writer.

Social media marketing is another great freelance position for people who aren’t as keen on writing. Try out People Per Hour to bid on social media gigs.

freelance social media marketing opportunities to repay debt

3. Do freelance design work

If you’re artistic, you can earn great money on 99designs. Graphics, websites, banners, posters, business cards and more - an artistic eye is both rare and valuable.

I personally use 99designs often to have graphics designed. You can earn about $30 for designing small graphics like the one below.

freelance design example

For more elaborate designs, expect to earn hundreds or thousands of dollars. This requires more specialized skills and some equipment, so the pay is much better. Good designers can earn over $50 per hour.

As with most freelance work, you can create designs for customers over 99designs on your own schedule. This makes it easy to pick up even if you have a full-time job, multiple part-time jobs, or family obligations.

freelance design opportunities to repay debt

4. Help people with tasks on Fiverr

Much like 99designs or Upwork, Fiverr allows you to get connected with people looking for freelancers. What’s different about Fiverr is that you can do almost anything. If you don’t have a specialized design skillset and don’t like to write, you can make extra cash to repay your debts by doing things like:

  • Planning parties for kids
  • Helping people brainstorm for romantic getaways with their partner
  • Business plans
  • Branding their small business
  • Distributing flyers
  • Data entry

That’s what’s great about Fiverr - if you've got a pulse, you can make money. If you can't think of something you could do, send is an email or leave a comment on this post. There seriously is something for everyone, we’ll help you find something.

freelance work opportunities to repay debt with no skills

The downside is that prices vary. As the name might suggest, tasks start at just $5. Services I’ve purchased from Fiverr have ended up costing much more, but to make extra money, sellers usually try to up-sell with extra services.

fiverr gig starting price

For example, if you were distributing flyers for a customer, you might charge them $5 for the first street corner. For each additional street corner, you’d add an extra $5. Most people don’t go for the basic service, so expect to earn more than $5 per task.

How to pay off debt quickly by paying less interest

On it's own, debt isn't a problem. The real killer is the interest. If all of your loans were 0% interest, there would be no downside to debt.

To cut back on the interest you pay on credit cards or your other unsecured loans, you can do something called collateralization.

This means putting some type of collateral behind your debts. By securing your debt to collateral, the risk to lenders is lowered, and so is the amount of interest you pay.

A credit card is a type of unsecured debt, while a mortgages and title loans are considered secured. Here are some common types of financing and what they are secured to.

Debt Type Security Interest Rates
Credit Card None High
Title Loan Vehicle Medium
Mortgage Property Low

Of course this means if you don’t make your monthly payments, the bank can seize and sell the asset you’ve provided as collateral.

Collateralizing your debts is simple:

  1. Find something you can use as collateral. A home is perfect, but a vehicle is fine as well.
  2. Find a lender that will provide you with a mortgage, HELOC, or title loan
  3. If lenders won’t approve you, improving your credit score first. Novita can help you to improve your credit.
  4. Repay your high interest loans using the lower interest secured loan
  5. Now that your credit card has a zero balance, do not use it again!

Risks of Collateralization

Step 5 shows the risk of doing this. Paying off credit cards like this makes it possible to go further into debt. Before you do any type of debt consolidation, make sure you change how you spend first.

Debt management advice that doesn’t work

When it comes to paying off debt quickly, there’s a lot of frustrating advice out there. It’s all written by people trying to fill an article quota. They’ve never been in debt, so they have no idea what it feels like, or how to fix the problem. Here’s some of my favorites.

Stop using your credit cards

You’re already trying to stop using your credit cards. You use them not because you want to, but because you don’t have enough cash left to pay your bills. Debt isn’t fun, you use it because you need to, not because you want to.

Try to save your “windfalls” for emergencies

If you had windfalls, you wouldn’t be in debt. If my wealthy, estranged uncle willed me thousands of dollars, do you really think I’d be looking for debt management advice? Probably not.

Pay off as much as you can afford

You’re already paying as much as you can afford - that’s the problem! What you can afford isn’t enough!

This advice is unhelpful and annoying. Not everyone is in debt because they’re a spending fiend. So what is there to do when the reasons for your debt is out of your control?

Best Loans to get out of debt

It seems a little backwards, but getting a loan can help you get out of debt. A "Get out of debt" loan is called debt consolidation. Basically, pulling your debts together to reduce the interest you pay. If you're paying 26% interest on your credit cards, you can roll that debt into a better loan.

By far, the BEST way to consolidate debt is through a home equity loan.

Because these loans are secured against property, the interest rates are super low. Like as low as 4%. If you've got $5,000 in credit card debt at 26%, you'll pay $3,982 on a 5 year term. A home equity loan at 4% would cost just $524. That is AMAZING savings.

Check out lenders for debt consolidation here. Home equity is the best, but with no collateral SoFi or Upgrade are pretty strong. Fill out your zip code to find a lender that works for you - they should be sorted by our rating, but you can always read reviews to make your own decision

FAQ: How to reduce debt

To reduce debt fast, you need to make pre-payments. The more aggressively you pre-pay your debts, the quicker they'll go away. That means finding as much extra cash as you can through saving, increasing earnings, or assistance from family.

To reduce your debt to income ratio, you need to reduce your debts, increase your income, or reduce the interest you pay. Debt can be reduced through pre-paying existing debts, and interest paid can be reduced through debt consolidation. Additional income can be generated through the gig economy, or by working more hours at your existing job.

To reduce your debt without hurting your credit you simply need to make your debt payments on time. If you make your payments on time, repaying your debts will build your credit over time, not hurt it.

The first step to reducing credit card debt is to stop adding to it. Only spend what you have. Next, you need to begin paying more than the minimum balances. Your credit card debt will quickly disappear.

Paying off high interest or low balance cards depends on your personality. If you want to feel rewarded for repaying debt, you should pay your lowest balance cards first. The number of accounts you owe money on will go down fast, which feels great. But you'll pay for it in interest.

If you want to stop the banks from taking your hard-earned money as interest, pay your highest interest accounts first. The number of accounts you owe money on will stay the same, but you'll keep more of your money. With the interest you save, you can reward yourself in ways other than the "good feeling" you get from paying down a debt account.