10 Creative Ways to Pay Down Debt

Author: Christy Bieber | June 24, 2019

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Make debt repayment easier by being creative

Being in debt can be a major burden. After all, you have to waste money on interest, and money is promised to creditors before you even earn it -- which makes it harder to live on what's left over without borrowing more. 

Becoming debt-free ASAP is a good goal and, the good news is, it doesn't have to be that hard. In fact, if you try out these 10 creative ways to pay down debt, you can make debt repayment easier than you ever imagined. 

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We see one hand handing another a wad of money, across a desk.

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1. Use a snowball or avalanche approach to debt repayment

Making extra payments to a whole bunch of debts at one time is unlikely to work very well. You'll make very slow progress on repaying each debt with this approach, so it can be hard to stay motivated. 

Instead, you should keep making minimum payments on all your debts but pay extra to one particular one. There are two methods of choosing which one to pay extra to: the snowball method or an avalanche method.

With the snowball method, you'll pay off the debt with the smallest balance first so you score quick wins. After that debt is paid off, devote all the money you were paying towards it monthly to the debt with the next smallest balance. Keep doing this until all debt is repaid. The monthly amount you pay to each debt keeps growing with this approach as one debt after another is paid off, and you'll stay motivated because you'll see debts disappearing.

With the avalanche method, on the other hand, you pay all your extra cash to the debt at the highest interest rate. Then you redirect those payments to the debt with the next highest rate until all debt is gone. It may take you longer to pay off some of these high-interest debts -- especially if they have larger balances -- but this approach results in paying the lowest total interest cost. 

ALSO READ: Here's How Much Debt the Average American Has in 2018

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2. Lower your interest rate

Debt at a high interest rate can be especially burdensome to repay because so much of your money goes towards interest rather than principal. Fortunately, there are actually a number of ways to reduce interest on debt. 

One option is to take out a personal loan at a lower rate than your current debt and use it to pay off all your existing creditors. You'll be left with just one loan to pay instead of many, your monthly payment may be lower, and your total costs of debt repayment should fall. 

You could also transfer credit card debt to a balance transfer card with a low 0% promotional rate. Just be aware some cards charge a fee and the promotional rate lasts only for a limited time. Ideally, make a plan to get the debt paid down before your promotional rate ends. 

Finally, there's an even simpler approach, although it's not always foolproof: simply ask your creditors to reduce your rate. Some credit card companies will do this if they don't want to lose your business, especially if you tell them you have a balance transfer offer from a competitor. 

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3. Turn coupon savings into debt payments

Using coupons can save you money on just about everything you buy. Whether you clip coupons from the paper, print them off your computer, buy them from coupon clipping sites, or search for promo codes online, you can score big savings with a few simple hacks to the way you shop

Any time you save with a coupon, why not use that cash for debt repayment? If your bank account is linked to your loan account, you can generally make an extra payment immediately for the amount of your coupon. This can work especially well for credit cards, which will actually allow you to make payments as many times as you want each month. 

If your lender doesn't accept multiple monthly payments, just move the saved money into a special savings account earmarked for extra debt repayments. When you make your monthly payment, add the money from the savings account to it. 

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4. Use credit card rewards or cash back to pay off debt

Your credit card probably helped you get into debt, so why not use it to help you get out of debt?

If you have a cash-back card, claim your cash-back rewards every month and use the money to make an extra payment on the debt you're working on paying off. 

If you have a rewards card that lets you redeem for points or merchandise, redeem for things you'd have spent cash on such as grocery gift cards or airline tickets. Then, use the money you'd have spent on these items to make an extra payment on what you owe. 

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5. Switch your payment schedule

Do you have any debts you pay on a monthly basis? If so, consider switching to paying half of the bill every two weeks instead of making just one monthly payment. 

Since there are 52 weeks in a year, making biweekly payments means you'll make 26 payments. That amounts to one total extra payment than you'd make if you simply continued to pay once every month. 

This approach is often used for mortgages, but there's no reason you can't use it for any debts that you pay on a monthly basis. 

ALSO READ: How to Pay Off Your Mortgage Early

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6. Make yourself some visual aids

Staying motivated can be one of the trickiest parts of paying off debt -- but it becomes easier if you have some visual aids to help you. 

Consider making a paper chain with each link representing $100 or $1,000 of your debt (depending how much you owe). As you pay off each amount, you'll move a chain from the link. You'll be able to see your progress in tangible form with this approach, which could motivate you to do more to pay down debt. 

You could also use a lego tower you remove some legos from each time you pay down your debt. Or, draw a thermometer on paper with your debt in increments that you color in each time you pay off a set amount. 

Whatever visual cues you use, the purpose is to make sure you're able to see the progress you're making so you actually stay inspired to send all these extra payments towards your debt. 

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7. Create monthly challenges for yourself

Sending extra cash to debt can sometimes make you feel deprived, but you could make it fun by challenging yourself to save as much as possible in certain areas each month and send the extra to your debt.

For example, for one month you could challenge yourself to seeing how low your food costs could go or to trying to make your meals on just $5 a day (or whatever amount works for you). Whatever you save on groceries compared to a typical month, send immediately to debt repayment.

The next month, you could challenge yourself to see if you could find only free activities to do for the month so you can redirect your entire entertainment budget to debt payoff.

If you mix up the challenges monthly, it should stay fun and you won't feel burdened by all the extra cash you're sending to your creditors. 

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8. Increase your debt payments with income from a side gig

The more extra you can pay on your debt, the faster your debt will be paid down. 

Unfortunately, there's only so much you can cut out of your budget to make extra debt payments. But you can increase your income substantially by picking up some side work -- and can use this extra cash to pay off what you owe ASAP. 

From selling on Etsy or eBay to dog walking or ride sharing, options for side gigs abound. Just pick something you can do with your spare time and immediately put the extra cash towards paying off debt. 

ALSO READ: 5 Tips for Finding a Side Hustle

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9. Automate extra payments

Setting up automatic payments of your bills is a great way to make sure you don't miss a payment. But you can and should set up automatic payments for more than the minimum. 

In fact, why not try inching up the automatic payments you're making just a little bit every week. If you're paying an extra $100 on the debt you're working on paying down, try upping that automated payment to $125 this month and then $150 next month.

By slowly increasing the extra payment, you probably won't miss the extra cash. Just keep inching up that payment amount until you find you really can't live on what's left. Then scale back a bit. 

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10. Enlist the help of an accountability buddy

For dieters, there are tons of groups where you have to go each week and weigh in. This helps keep you accountable -- and it can also make losing weight more fun when you're doing it with others. 

Why not try the same approach to debt payoff? If you have one or more friends working on paying down debt, set up weekly or monthly check-ins. You can each share the progress you've made towards becoming debt free, and can even exchange tips and tricks on how you're cutting spending to pay off what you owe. 

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Freedom from debt is within reach

By trying some of these tactics, you can make debt repayment more fun and can hopefully pay down what you owe much more quickly. 

Being debt free is liberating, and it allows you tons of extra cash to use towards improving your own net worth instead of wasting it on making creditors richer. Try these tactics today so you can achieve this milestone ASAP and get a whole lot closer to becoming financially secure. 


Christy Bieber has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Etsy. The Motley Fool recommends eBay. The Motley Fool has a disclosure policy.

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