Pay Down Your Debt Faster Video
Learn strategies for paying down your debt faster.
Paying down your debt faster can help you get a head start on your goals, whether it’s applying for new credit, saving on the cost of borrowing, or just reducing your debt. Here are some strategies to think about when considering repayment plans that could help you pay your debt off faster.
Tips for paying off debt
Pay more than the minimum.
Pay off your debt and save on interest by paying more than the minimum every month. For example, if you have a $10,000 loan with a 7% annual percentage rate, and you paid $198 a month, you’d be able to pay off your debt in 5 years. But if you were to increase your payment by just $40 a month, you could pay off your debt in 4 years, save $376 in interest payments and be debt-free a year earlier.
Make a payment every 2 weeks.
If you pay half of your monthly bill every 2 weeks instead of the full amount once a month, you’ll make one extra full payment over the course of a year — and you could pay your debt off faster. Make sure to ask if your lender applies these partial payments to your principal.
Pay off your most expensive loan first.
Your most expensive loan is the loan with the highest interest rate. By paying it off first, you’re reducing the overall amount of interest you pay and decreasing your overall debt. Then, continue paying down debts with the next highest interest rates to save on your overall cost.
Set up automatic payments.
Stay on top of your debt by setting up automatic transfers — simply select the date, the amount, and the debt you’d like to pay off.
Wells Fargo options for paying off debt
Shorten the length of your loan.
Refinancing your debt to a shorter term could help you pay it off faster and save on the total cost of borrowing. With the same interest rate and shorter term, you won’t pay as much total interest over the life of the loan. Remember, shortening the term of your loan could increase your monthly payments.
Consolidate multiple debts.
Credit Score Tip
Understand the total cost of borrowing
When considering a new loan or restructuring your current debts, remember to consider your borrowing costs. Extending the term of your loan may lower your monthly outgo, but you may pay more in interest over the life of the loan, increasing your total payments.