Notebook with Pay Off Debt written on it in marker.

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Many people racked up credit card debt in 2020. For some, that debt was fueled by the pandemic or the loss of a job. For others, it came about during the holidays. Either way, if you're starting off 2021 with debt, here are a few steps you can take to be rid of it by the end of the year. 

1. Follow a strict budget

If you owe a balance on your credit cards, it will take money to pay it off. And you can free up that money by spending your earnings wisely and cutting back on non-essentials until you're out of debt. A good way to do so is to set up a budget that maps out your expenses and shows you exactly what savings opportunities you have each month. If you pledge to really cut back in 2021, you may find that you're able to free up even more cash than expected. 

2. Lower the interest rate on your debt

The less your credit card debt costs you, the easier it'll be to get rid of it. To this end, see what interest rate you're paying on the cards you owe money on, and then apply to do a balance transfer to a card with a lower interest rate. You may, in fact, manage to qualify for a card with a 0% introductory APR for a year or longer. 

Another option for paying off that debt? Move it off of your credit cards. If you apply for a low-interest personal loan, you can use your loan proceeds to pay off your cards, and then pay back that single loan month after month. 

Finally, if you own a home, you may be able to tap its equity to pay off your credit cards. For one thing, you can apply for a home equity loan or home equity line of credit (HELOC) and, like a personal loan, use the proceeds to pay off your balances. With both a home equity loan and a HELOC you're apt to pay much less interest than what the typical credit card will charge. Another option is to do a cash-out refinance on your mortgage, where you borrow more than your remaining home loan balance and use the rest for whatever you please (in this case, knocking out your credit cards). Incidentally, this is a great way to lower your monthly mortgage payments, thereby freeing up more money for debt payoff purposes.

3. Use cash windfalls to your advantage

You may have periods when extra money comes your way during the year, like a tax refund from the IRS or a bonus from your employer during the holidays. Tempting as it may be to spend that money, a better bet is to apply it to your existing debt. By knocking out a chunk of your principal, you'll save yourself money on interest, making that balance easier to get rid of for good.

Starting the new year with credit card debt may not be ideal, but if that's the situation you're in, don't waste energy beating yourself up over it. Instead, map out a plan to shake that debt. If you limit your spending, make your debt more affordable, and manage windfalls strategically, you may find that you're able to close out 2021 with a clean slate and a more favorable outlook going into 2022.