Racked Up Debt in 2021? How to Pay It Off in 2022

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  • You may be starting off the new year with debt for a host of reasons, from unplanned bills to holiday spending.
  • If you want to be debt free by the end of the year, it pays to make your debt less expensive, spend differently, and boost your income.

Here's your path to being debt free by the time 2022 comes to an end.

If you're starting off 2022 with a pile of debt, you're no doubt in good company. There are lots of reasons why people end up in debt. Perhaps you were hit with a costly home repair in late 2021 that your paycheck couldn't cover. Or maybe you gave into peer pressure and overspent on the holidays.

Either way, the sooner you pay off your debt, the less it'll cost you. And if your goal is to be debt free by the end of the year, here are some key moves to make.

1. Find a more cost-effective way to pay off your debt

If you racked up balances on some of your credit cards, then you're probably paying a lot of interest on your debt. In that case, finding a more efficient way to pay off those balances could not only save you money, but make your debt easier to eliminate.

One good option to look at is a balance transfer, where you move your different balances onto a single credit card with a lower interest rate attached to it. You may even qualify for a 0% introductory APR.

You can also consolidate your credit card debt with a personal loan. A personal loan lets you borrow money for any purpose, and you'll generally pay less interest on one than what a credit card will charge. If you owe $5,000 on credit cards charging an average interest rate of 18%, moving that debt over to a personal loan charging 8% will result in some savings.

Finally, if you have a lot of equity in your home, you could borrow against it via a home equity loan or line of credit and use that money to pay off your debt. As is the case with a personal loan, you'll generally pay less interest on a home equity loan or line of credit than what your credit cards will charge you.

2. Rethink your spending to free up cash

Making your debt less costly to pay off is a helpful move -- but only if you manage to free up cash to chip away at it. To that end, you'll need to take a look at your budget and identify expenses to cut back on.

That could mean canceling your gym membership and cable plan if your debt load isn't so heavy. But if you want that debt paid off by the end of the year, you may need to think bigger. That could mean getting a roommate to slash your housing costs or giving up a car if you can get by without one.

3. Boost your income with a job on the side

If your earnings are such that there isn't much money left over at the end of the month, and you don't have many expenses in your budget you can reasonably cut back on, then boosting your income could be your ticket to paying off your debt by year's end. These days, there are numerous options for getting a side hustle, so think about the different ways you can grow your earnings.

If you need flexibility in your side hustle, you'll want to avoid signing up to work evening shifts at a store and instead focus on gigs with flexible hours, like driving for a ride-hailing company. Similarly, if you're being cautious due to the pandemic, you may want to focus on work you can do remotely, like online tutoring or data entry. The point, however, is that there are many different types of gigs available, and taking one on could help you pay off your debt quickly.

If you're in debt, it's natural to want to shed it as quickly as possible. Follow these tips, and you may be celebrating your debt-free status by the time 2022 comes to a close.

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