Theres no question that credit card debt can be easy to get into. All you have to do is swipe your card for a purchase to pay. And, if you arent careful, that debt can accrue quickly because credit cards generally have high interest rates, which can make it even more difficult to get out of debt, says certified financial planner Hanna Horvath.
“Credit card debt has obviously become extremely expensive,” Horvath says. “I think it will still be quite expensive to carry credit card debt.”
But if you find yourself with a large amount of credit card debt – lets say $20,000 – there are some methods you can use to get out.
Carrying high amounts of debt like $20,000 can feel overwhelming. The interest charges, late fees, and constant worry about whether you’ll be able to make the minimum payments each month is stressful However, with some planning and discipline, you can pay off $20,000 in debt relatively quickly. Here are some of the most effective strategies to help you get out of debt fast.
Take Stock of Your Debts
The first step is to clearly see how much debt you have. Make a list of all your debts including credit cards, personal loans, student loans, auto loans, medical debt and anything else you owe. For each debt, note the following:
- Original amount borrowed
- Current balance
- Interest rate
- Minimum monthly payment
This gives you a complete picture of your debt load so you know exactly what you’re dealing with. Tracking all this in one place helps you make a payoff plan.
Cut Expenses
To pay off debt quickly you need to free up as much cash as possible each month. Building a detailed budget is crucial – track your average monthly expenses on everything from housing transportation, food, utilities, subscriptions, entertainment and more. Look for any areas where you can trim spending.
Some easy ways to cut expenses include:
- Downgrade cable/streaming services
- Eat out less
- Cancel unused subscriptions and memberships
- Shop thrift stores
- Use coupons and cashback apps
- Buy generic brands at the grocery store
Every dollar you save is one you can put toward debt repayment. Small lifestyle tweaks add up.
Increase Income
Bringing in more money will accelerate debt payoff. Options to boost income include:
- Ask for a raise at your current job
- Get a side gig driving for a rideshare or food delivery service
- Sell unused items around your home
- Rent out a room on Airbnb
- Freelance in your area of expertise
Even an extra $200-500 a month from a second job or monetizing a hobby can make a big difference.
Direct Extra Money to Debts
As you free up cash flow through cutting expenses and increasing income, put that money directly toward debt repayment. Be intentional in prioritizing debt payoff every time you have extra available funds.
Some strategies that help:
- Automate payments for an extra $25 or $50 weekly straight to your highest-interest debt
- Every time you get a windfall like a tax refund or work bonus, use it to pay down debts
- When you cut an expense, add that monthly savings to debt payments
- Celebrate a raise at work by allocating the extra income to debt repayment
Pay More Than the Minimum
One of the fastest ways to pay off $20,000 in debt is to pay more than the minimum payment due every month. Minimum payments only cover a tiny fraction of the interest charges. Paying extra directly cuts down the principal.
For example, if you owe $20,000 on a credit card with 18% APR and a 2% minimum payment, it would take over 17 years to pay off the balance making minimum payments. But if you paid just $100 more than the minimum each month, you could pay off the debt in about 5 years and save over $9,000 in interest.
Pay as much extra as you can each month. Every dollar above the minimum shortens the payoff timeline.
Consolidate Debts
Debt consolidation streamlines your repayment by rolling multiple debts into one, typically with a lower interest rate. This helps you save money by paying less interest each month.
Options for consolidating $20,000 in debt include:
- Balance transfer credit card: Transfer balances from high-interest cards onto a new card with a 0% intro APR for 12-18 months
- Debt consolidation loan: Take out a personal loan to pay off credit cards and other debts, often with a lower rate
- 401(k) loan: Borrow from your 401(k) up to $50,000 and pay it back over 5 years with interest
- Home equity loan: Use home equity to pay off debts in a lump sum and repay the loan over time
Weigh the pros and cons of each method. Consolidating and lowering interest rates helps accelerate payoff.
Increase Payments with Windfalls
As you work on paying down debt, unexpected money like tax refunds, work bonuses or gift money should go straight to extra debt payments. Avoid the temptation to spend windfalls – instead, use them to increase monthly debt payments when possible.
Even a few hundred dollars extra when you get a bonus or tax refund can make a noticeable dent in your debt payoff timeline. Be prepared to direct every financial windfall you receive toward debt repayment.
Get an Accountability Partner
Paying off a large amount of debt takes discipline. Enlist a trusted friend or family member to serve as an accountability partner throughout your debt repayment journey. Share your plan and monthly goals with them. Then check in regularly and update them on your progress.
Having someone help keep you focused and on track prevents you from veering off course. They can offer encouragement and advice if you hit obstacles. Knowing someone is monitoring your continued progress can provide the motivation needed to pay off debt fast.
Avoid Taking on New Debt
As you work to pay off debt quickly, be cautious about taking on any new debt. Avoid unnecessary purchases that would add to your overall debt burden. Only use credit cards in true emergencies and make sure to pay the balance off right away.
The faster you can eliminate existing debts without adding new ones, the quicker you will become debt-free and the more money you will save on interest. Be laser-focused on your payoff plan.
Track Progress and Celebrate Milestones
As the balance owed goes down month after month, take time to acknowledge and celebrate progress. Seeing that you’ve paid off $5,000 of the original $20,000 provides encouragement to keep going.
Visualize your success by coloring in a progress bar graph as you near closer to zero debt. Reward important milestones like paying off a credit card by enjoying a small treat or taking a weekend trip. Stay motivated by tracking and celebrating every debt repayment win.
Paying off $20,000 in debt may seem intimidating but is very doable with focus and discipline. Following these strategies will help you eliminate high-interest debt rapidly and reach the finish line faster than you may think. Stick to the plan, make extra payments when possible, and you can become debt-free quicker than you ever imagined.
Take on a side hustle
Many people have a side hustle in addition to their full-time job. If you have credit card debt, you could start a side hustle and put all of the money toward your debt. Some side hustles to consider include opening an Etsy shop, doing paid surveys, renting out a room in your home and getting a gig economy job, like dog walking or driving for a rideshare service.
Use a debt relief company
If you want outside help dealing with a $20,000 credit card bill, a debt relief company might be a good idea. There are a few types of debt relief programs these companies offer, including:
- Debt management program: If you use a debt management program, a credit counselor may help negotiate lower interest rates and roll all of your loans into one payment, which is made directly to the credit counseling agency.
- Debt settlement: With debt settlement, the debt relief company negotiates with your creditors to help get you out of debt by reducing interest rates or forgiving a portion of your debt. With this option, you stop making payments to individual creditors and instead make payments to the debt settlement company, which holds the money in an account until it accrues enough cash to pay off your debts. This option could have negative implications for your credit score, so think carefully before you pursue it.
Take the time to look at different debt relief companies before you choose the one you want to work with. Each one may have different requirements, including a minimum amount of debt, and each will charge different fees. Make sure you find a service you are comfortable with that fits your needs.
Best Way to Pay Off Debt Fast (That Actually Works)
FAQ
How long does it take to pay off 20k debt?
How to pay off a $20,000 loan fast?
- Make biweekly payments, rather than monthly. Making a smaller loan payment every two weeks is one of the best ways to pay off a loan faster. …
- Make an extra payment toward your personal loan. …
- Round up your loan payment. …
- Look into refinancing your loan.
What is the fastest debt payoff method?
The debt snowball method uses the snowball effect to build momentum by paying off debts from smallest to largest. Each time you pay off a debt, you roll that payment into the next one, speeding up your progress.
How do I pay off debt if I live paycheck to paycheck?
- Tip #1: Don’t wait. …
- Tip #2: Pay close attention to your budget. …
- Tip #3: Increase your income. …
- Tip #4: Start an emergency fund – even if it’s just pennies. …
- Tip #5: Be patient.