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How to Pay Off Debt Faster

Pay Down Your Debt Faster Video

Learn strategies for paying down your debt faster.

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Paying down your debt faster may 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 7.00% 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.

Pay more than once a month.

Pay your credit card bills more than the required once per month. This may make it easier to stay on track of how much you owe. Paying your credit card bill regularly may also lower your balance/utilization ratio. The credit utilization ratio is the percentage of your total available credit that is currently being used. The utilization ratio is one of the components used by credit reporting agencies to calculate your credit score.

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.

Consider the snowball method of paying off debt.

This involves starting with your smallest balance first, paying that off and then rolling that same payment towards the next smallest balance as you work your way up to the largest balance.  This method can help you build momentum as each balance is paid off.

Keep track of bills and pay them in less time.

Stay on top of your debt by bill reminders and Online Bill Pay. Simply schedule the amounts you want to pay and when you want to pay them. You can also recieve eBills from payees offering electronic billing.

Wells Fargo Online® — Bill Pay

Wells Fargo options for paying off debt

Shorten the length of your loan.

Refinancing your debt to a shorter term may 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.

Consider Refinancing

Consolidate multiple debts.

Loan consolidation may help you repay debt faster by combining several high-interest rate loans or credit card balances into one new loan ideally with a lower interest rate.

 Credit Score Tip 

Trying to eliminate all of your debt? Keeping credit accounts open, and paying the balances in full every month, may help you maintain or increase your credit score.

Next Step:
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 payment, but you may pay more in interest over the life of the loan, increasing your total payments.

Learn more

Annual percentage rate

The annual percentage rate describes the interest rate for an entire year, instead of just per month, as applied on a loan, mortgage, credit card, etc.