Can You Teach Me How to Pay Down Debt Fast?

Dear Aelyn,

My partner and I are talking about getting married. The only thing holding us back is that he has a little over $25,000 in student loan debt and I have $9,000 in credit card debt. We really want to be debt-free before we tie the knot (weddings are so expensive), but right now being debt-free feels years away.

How can we pay down debt fast?

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I want to start by giving you and your partner a major round of applause for focusing on your financial health and working as a team to get your finances in a good place. The last thing you want is to start your marriage off with money stress weighing you down. Many couples fight about money and not having debt on your plate is a very easy way to avoid some big money fights. 

The fact that you are both talking about debt and being honest about where you are is the best possible place to start on your journey to paying off your debt. Since you already have everything out on the table and know how much debt you have, you can jump straight into making a plan to pay off your debt fast—here’s how you can do that. 

Budget for Debt

When people create budgets, they tend to focus on the expenses they have to pay. This is the right place to start a budget, but required expenses shouldn’t be your only priority when budgeting. 

When you sit down to map out your budget, you need to make room not just for your required monthly debt payments, but for your goal debt payments. For example, if you have to spend $500 a month on minimum required debt payments, you can add $750 to the debt repayment section of your budget. That way, you can make extra payments, which saves money on interest. This will help you pay down your debt faster in two ways. First, making extra payments (request all extra payments go towards your principal balance and not interest payments) will help you pay off your debt faster simply by making extra progress. Second, the smaller your balance is, the less you pay in interest, which frees up more money to put towards the principal balance each month. 

If you really want to pay off your debt faster, you need to also make some hard choices about what to cut from your budget. You and your partner can work your way back from your ideal engagement date. Look at how many months you have until that date arrives to pay off your debt. What would you need to spend on debt repayment each month to make that goal happen? If you can’t afford that large of a payment each month, you may need to cut other expenses from your budget (travel, shopping, dining out, subscription services, etc.) to make your aggressive repayment plan doable. 

Use the Debt Avalanche Method

There are two main debt repayment strategies that consumers turn to in order to make progress paying down debt. The debt snowball method involves making extra payments on the smallest source of debt first. This can be motivating for people who feel overwhelmed by having multiple sources of debt, which can give them momentum, but it really isn’t the fastest way to pay off debt.

If you and your partner each have multiple sources of student loan debt or credit card debt, you can save the most money—which helps you pay down your debt faster—by using the debt avalanche method. 

With the debt avalanche method, you make all minimum required payments on all sources of debt each month. From there, you put any extra payments towards the source of debt with the highest interest rate. Once you finish paying off the debt with the most interest, you can then take all of the money you were spending on minimum and extra payments each month and can put it towards the next highest interest rate debt. Your monthly debt repayment budget remains the same, but you’ll make so much progress each time you pay down one source of debt and can move on to the next. This method also saves you the most money on interest. 

Find Relief from High Interest Rates

One of the reasons debt is so hard to pay off is because of the high interest rates that can come with it. This is especially true with credit card and private student loan debt. 

There are steps you can take to get out from under these high interest rates. Since you and your partner have credit card and student loan debt, let’s look at some examples that apply to those types of debt.

• Student loan debt refinancing. If you have a high student loan interest rate and your current credit score and market conditions can lead to a lower interest rate, you can refinance. When you refinance your student loan or loans, you end up with one new loan (which pays off your original sources of debt). If this loan has a smaller interest rate, you can afford to make more payments towards your principal each month and can pay off your debt fast. 
• Credit card balance transfer. Whether you have debt on one credit card or multiple credit cards, you can transfer all of that debt to what is known as a balance transfer card. Look for a balance transfer card with a 0% APR introductory offer. Some balance transfer cards offer a promotional period where they don’t charge you any interest at all (usually this period lasts six to 21 months). During that time with no interest, all of your payments will go towards paying down the principal balance. Be careful here—if you don’t pay off all the debt by the time that introductory period ends, you will have to start paying interest again. If you don’t think you can pull off paying all of the debt off during that period, just make sure this new credit card doesn’t have a higher interest rate than your old one. 

Learn How Money Works

One way you can make more progress on paying off your debt and in your financial life in general, is to educate yourself about how debt works, what you need to do to keep your credit score happy (which can help you avoid high interest rates in the future), and how to manage your money effectively. To help make mastering your finances easier, we created Finance 101: Mastering Your Finances. This course will walk you through how to properly manage your money and how to make it work for you—including how to pay down your debt efficiently.