Debt repayment

Reduce And Eliminate Your Debt

Getting out of debt can be a difficult task. Sometimes, keeping up with consistent monthly bills and saving for a rainy day can be overwhelming while paying the minimum monthly credit card repayments. But, it is feasible to reduce and eliminate your bills, no matter the cause.

According to the New York Federal Reserve, consumer debt hit $14.56 trillion after the fourth quarter of 2020. The consumer debt for the fourth quarter of 2008 was up $414 billion over the previous year and nearly $1.9 trillion higher than the previous high of $12.68 trillion set in the third quarter of 2008.

Each credit card holder has four cards on average, and a credit card holder’s household owes $8,398 in credit card debt.

So, in this article, you’d learn practical ways you can reduce your debts, as well as effective debt elimination strategies.

Ways to reduce or eliminate debt

If you are neck-deep in personal bills and feel stuck, here we discuss some approaches on how to reduce debt quickly.

#1 Understand debt reduction strategies

A perfect understanding of the best debt reduction strategies can enable you to get your financial obligations under control. These are the common methods you leverage if you want to learn how to reduce your debt effectively.

Arrange for a lower payback rate

Bidding with your creditors to decrease how much you’d payback is one of the procedures you can use to reduce your debts. You’ll be amazed at how many creditors are prepared to reduce your rate of interest based on your repayment history and current account status.

You may be in a suitable place to apply for a reduced rate if you have kept a strong relationship over the years. While you can do it on your own, several third-party companies offer debt compensation services for a fee. These debt compensation firms represent you when they settle with people you owe to decrease your monthly repayment and rate of interest, as well as eliminate or minimize any penalties.

The parties agree on a reasonable repayment schedule that will allow you to settle your bills in three to five years. As you offset that debt over the years, this enables you to retain money on repayment interests.

Highest interest rate method

This debt-reduction plan concentrates on the bills with the most expensive interest, such as credit card and student loan debts. Because it costs you the most, the aim is to repay the bill with the most expensive return rate as fast as you can. Even though it may not appear like you’re progressing, this strategy will aid you to reduce and eliminate your most costly loans first, saving you money over time.

Examine your accounts and decide the extra amount you can set aside for bill repayment. Leveraging this plan to repay your bills will assist you to become debt-free quickly.

The Snowball method

Most individuals feel that the debt snowball approach is an excellent plan to reducing how much they owe. This plan concentrates on the smallest bill. It enables you to take progressive steps by offsetting the least balance monthly with the highest amount you can pay. The objective is to be relieved of your debt in the shortest time.

So, you keep contributing the least payments on each of your bills, and whatever surplus you have goes to your smallest debt. This plan will assist you in offsetting your bills faster.

Immediately you’ve paid off one smaller loan, use the money you’ve saved to offset the next least bill.

As you offset each bill, you’ll construct a “snowball” of payments. Unlike the higher interest rate plan, you’ll make rapid progress as you offset smaller loans. However, because you won’t be concentrating on your exorbitant bills, you may eventually repay more in the long term.

The Debt Avalanche Method

This calculated plan may be a good fit for those with debt spread in terms of type and total. So, this plan focuses on the overall issue before breaking down the debt into amounts owed, return rates, and payoff feasibility. You may then evaluate which bills make the most sense to be offset and in what sequence, based on totals, payment return rates, and type of debt.

If you own a large deficit on a high-interest credit card, for instance, consider settling above the least on a credit card with a smaller balance and payment return rate while chipping away at a portion of the overall bill. Keep putting in the least payments on your home or auto loan until one of the credit card obligations is paid off.

#2. Organize your monthly bills

Acknowledging the bills you owe is a critical step you require to take in your debt reduction plan. It helps you know the areas that require your monetary attention the most. Taking an inventory of your financial condition includes knowing:

  • Total family income
  • Total bills accrued
  • Interest rates
  • Personal credit score
  • Terms of Payment
  • Payment status
  • Income outlook
  • Sources of debt

You will better understand your economic condition once you have compiled all of your data into one view. This action determines your next steps in getting out of debt.

While tackling your debt, you may utilize a bill calendar to store all your data in one location. This tool helps you track all your bills and set reminders for when they’re due. In addition, tracking your monthly costs might assist you on the journey to being debt-free.

#3: Create your debt reduction plan

After you have taken an inventory of your economic condition and analyzed the various methods to reduce your debts, To effectively develop a debt-reduction strategy that works for you, utilize a debt-reduction worksheet.

You’ll need documents about how much you owe and information on your interest payments to complete your worksheet.

The highest return rate technique may be the best option for you to conserve the most money while still offsetting your bills. However, if seeing immediate results motivates you, you might want to think about the snowball method.

Ultimately, select the most suitable approach for your financial condition and start executing on it.

How to Eliminate Debt

Even when you are steady, paying those monthly bills can be such an arduous task. So, let’s explore simplified ways on how to eliminate debt quickly.

#1 Refinance debt

Debt refinancing to a smaller return rate can spare you hundreds of dollars in interest while also allowing you to reduce and eliminate your debt faster. Mortgages, auto loans, personal loans, and student loans can all be refinanced.

A debt consolidation loan — a personal loan with smaller return rates than the existing ones, is one way to do this effectively.

If you have accrued so much debt on your credit card, you may think about shifting it to another card.

#2 Commit windfalls to debt

When you receive a tax return or stimulus check, rather than keeping the cash in your bank or indulging yourself, use it to pay your loans.

Redeeming your life insurance plan could also be a good repayment choice for your bills because it lets you offset higher sums of debt more rapidly. For example, suppose you’re drowning in debt and don’t have any recipients who would reap from your life insurance scheme. As a result, this selection can go a long way in eliminating the debt in no time.

So, you have the option of devoting the total windfall to debt or splitting it 50/50 between debt and something pleasurable, such as a future vacation or a lavish supper.

This system is an effective debt elimination plan because you apply your surplus income to repay those debts.

#3 Use a statute of limitations law to eliminate old debt

We all desire to offset our debts. However, if you’re in a tight spot and don’t have the resource, it’s a better idea to prioritize current financial obligations and eliminate old payments that have lasted for seven to ten years or even more than that.

When it comes to outstanding bills, each state has its own set of restrictions. For example, some states prohibit debt collectors from collecting specific types of debts after a particular length of time has passed. At the same time, others limit the period of time you can be sued by a creditor for an old debt.

In any case, you may check to see if the statute of limitations on an old debt you owe has expired. You should be able to forgive it if it has already passed.

#4 File bankruptcy to discharge your credit card debts

It’s best to consider bankruptcy as a last resort for debt elimination.

However, in extreme cases, such as when you have no money generation or entirely unmanageable credit card bills or medical bills, a Chapter 7 bankruptcy petition is the best decision if you are looking for how to eliminate your debt quickly.


Even though some of these approaches may not move the needle instantly in your finances, they help you create a stable monetary foundation that will help you reduce your debts over time. In addition, following and measuring your advancement while on this journey keeps you motivated as it suggests to you that you’re approaching your debt repayment target.

If you’re experiencing any challenges reducing your debt, consult a financial planner or a credit counselor.


Olha graduated from Brigham Young University - Idaho. She joined PocketGuard in 2022 as a digital marketing manager with a strong background in product marketing. Olha is focused on brand awareness ...

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