6 Painless Ways To Chip Away at Debt

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If you’re realizing that a full month of the new year has passed without much to show for your resolution to end 2022 debt-free, you still have 11 months to chip away. The important thing is to be consistent and have a strategy. GOBankingRates asked the experts about the best ways to turn big debts into small debts without undergoing any drastic lifestyle changes.

Find Out: 7 Simple Habits That Will Make You Richer in 2022
See: How To Compound Your Income in 2022

Here’s what they said.

Track Your Expenses To Lower Your Expenses

Healthy spending is one of the keys to debt management — every dollar not spent, after all, is one that could be used to pay the piper.

“One of the best ways to pay off your debt is to lower your expenses so you have more money to throw at your debt,” said Maggie Tucker, co-host of the friends on FIRE podcast. “And one of the best ways to lower your expenses is to start tracking them. Research supports that what gets measured gets better, so start logging and tracking all of your expenses. It will get you on your way to spending less and paying down more debt.”

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Read: 10 Ways To Bounce Back From a Heavy Spending Month on Your Credit Card

Call In Reinforcements

Just like when you’re trying to quit smoking or get in shape, it can be much easier to stare down an intimidating debt when you’re holding someone’s hand.

“Find an accountability partner to help track and discuss the progress of paying off your debt,” Tucker said. “You two can help to hold each other accountable and continue momentum on your debt-payoff goals. This accountability partner could be another friend in debt, a financially-savvy friend, your mom, or anyone who will offer you positive and disciplined support on your debt-payoff journey.”

See: What Not To Do While Trying To Get Out of Debt

Ask For a Better Deal

Even before the pandemic, people could often get better terms on debts they owed just by calling and pleading hardship. If anything, that tactic is probably easier now. 

“Some types of debt are negotiable, from credit cards to medical bills,” Tucker said. “Call the lender and let them know you’re having trouble paying off your debt but you’re focused and committed to making it happen, and see if the interest rate can be reduced or if the medical bills are negotiable. It can’t hurt to ask, and there are many times when these items are negotiable. Lenders want to be paid back, so they are incentivized to work with you.”

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Keep Reading: 16 Key Signs That You Will Always Be In Debt

Start Small With the Snowball Method

If you have debts with multiple lenders, start with a fight you can win by attacking your smallest debt with everything you have, leaving just enough to keep the rest at bay, then your next-smallest debt, and so forth. It’s called the snowball method. 

“In this way, you can quickly pay off one debt while making minimum payments on the rest,” said Adam Wood of RevenueGeeks. “The debt snowball method can help you focus on one debt at a time, building momentum and staying on track.”

Bill Clunas of Success Foundations Wealth Management, a financial professional with more than 25 years of experience, thinks the power of the tactic has more to do with psychology than with strategy.

“You see, people need to experience the win,” Clunas said. “Each win makes them feel good and they want to achieve another win. Once you’ve paid off that smallest debt, use that payment and add it to the next smallest debt until it’s gone. Keep doing this until all debts are repaid. There are experts who say you should focus on the debts with the highest interest rates first, and while this is not a bad idea, it may not lead to a win for quite some time. In my experience, these smaller wins lead to great success.”

Make Your Money Work for You

The only exception is if you have a payday or title loan.

“These loans have substantially higher interest rates, ranging from 300%-400% APR, and should be paid off quickly,” Wood said.

Related: 9 Fastest Ways To Pay Down Debt, According To Experts

A Personal Loan Can Help a Little, but Rates Are Rising — Act Fast

The only way to pay down debt is to pay down debt. But unless some windfall lets you pay it off all at once, one of the big keys is to pay as little interest as possible while you chip away at the principal.

“Refinancing debt can save you hundreds of dollars in interest and help you pay it off faster,” said Adam Wood, a real estate investor and founder of SparkRental. “A debt consolidation loan — a personal loan with lower interest rates than your existing loans — is one option.”

Personal loan rates are not great. According to Forbes, the average fixed rate on a three-year personal loan was 10.88% between Jan. 17-21.

Now, 10.88% is a whole lot better than high-interest credit card debt, but that rate is only for the best-qualified borrowers with credit scores of 720 or above. If you have so much credit card debt that you’re shopping for a debt consolidation loan, chances are good that you’re south of that. The average credit card APR has climbed to 19.55%, according to LendingTree, so a personal loan will probably be better, even if only by a little, for borrowers with less-than-pristine credit — for now.

Interest rates are all but certain to rise soon — and they’re expected to rise more than once in 2022 — which means personal loans will soon be more expensive.

Helpful: How Millennial Women Can Take Control of Their Debt

A Balance Transfer Card Can Buy You a Free Year or More

If your credit is good enough for a personal loan, then it very well might be good enough to get you approved for a balance transfer card, which buys you a temporary, but long-term stay of execution.

“These cards provide 0% APR for six to 18 months,” Wood said.

You’ll still have to make the minimum payments, and the debt won’t go away — but it also won’t accrue any interest while you pay it down. Currently, Wells Fargo Reflect is probably the balance transfer card to beat. It comes with a 0% APR introductory offer that’s good for 18 months, but with on-time payments, you can get a three-month extension, which shelters your high-interest debt in a free safe haven for a full 21 months.

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of Wall Street's investment community in New York City.

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