Qapital’s Guide to

Paying Off Debt

Here’s what you need to know about how to pay off debt fast

If you’re concerned about how much debt you have and how to pay it off, rest assured that you’re not alone. Incurring debt happens to almost everyone, in some way or another – whether it’s from student loans, buying a car or a home, or even just from carrying a credit card or two, chances are at some point in your life you’ll have to make some decisions about how to pay off debt. It’s important to remember that not all debt is bad, but if your balance owed is more than what you currently earn, or if debt is beginning to interfere with your financial goals like saving for retirement or developing an emergency fund, it’s time to get serious about paying off that debt fast.

Here are some of the most common questions people have about how to pay off debt, as well as our tips for the best ways to pay off debt and make progress toward your financial goals. 

How do I pay off debt fast? 

Paying off debt quickly is possible, if you’re willing to make some temporary sacrifices to your lifestyle. By sticking to a budget, cutting unnecessary expenses, and finding ways to garner extra income, you can get (and stay) out of debt.

  • Find your Spending Sweet SpotFinding your Spending Sweet Spot will help you keep track of the money coming in and going out of your bank account each month. This will let you know just how much money you have, so you can know how to spend it wisely and pay off debt. If you’re not sure what your Spending Sweet Spot is, Qapital can help you find it and keep you accountable so that you can begin to pay off your debt more quickly. 
  • Cut unnecessary spending and live below your means: The best way to pay off debt and avoid taking on any new debt is to live below your means. Although you may technically be able to afford a $400 monthly payment on a new car, living below your means requires recognizing that buying a used vehicle outright or for much less than the cost of a new car leaves you with more money to put toward paying off debt fast. Remember that when it comes to spending, just because you can, doesn’t mean you should – so cancel the automatic subscriptions, brown bag your lunch, and start putting that money toward getting rid of your debt.
  • Find a side hustle to earn extra income: If you’re really serious about paying off debt fast, then the best way to do so is to earn some extra income that can be put entirely toward any outstanding balances. The gig economy is alive and well, thanks in large part to services like Uber or Lyft, AirBnB, and TaskRabbit, all of which allow you to work according to your own schedule and earn extra money to supplement your main source of income. Even if you only work a few extra hours a week, the money you earn can be put toward paying off debt, thereby relieving some of the strain on your main paycheck.

Is it better to pay off debt or save? 

Paying off debt and saving money are two important financial goals, but they can seem mutually exclusive. How can you effectively save money toward something like retirement when you also need to put your money toward paying off debt? The short answer is that there is no one right way to pay off debt and save money, and some people can manage both at the same time, while others can’t. There are a variety of factors that might influence which approach you decide to take. Here are some things to consider when trying to decide if you should pay off debt or save: 

  • How much and what kind of debt you actually have: Even if you have debt that is going to stick around for a long time, like a mortgage payment or student loans, you might find it manageable to save money while also paying off debt. For most people, it’s just not realistic to pay off that amount of debt in a short period of time so that you can dedicate the rest of your life to saving, nor is it advisable to put off saving for something like retirement for that length of time. Mortgages and student loans are often considered “good debt” because they come with the potential to increase your overall net worth. Debt resulting from credit card use or personal loans, however, is “bad debt,” meaning that it offers little reward and can have a significantly negative impact on your overall financial wellness. Bad debt should be paid off as quickly as possible, whereas good debt is fine to carry so long as your payments are made each month.
  • Your personal money management habits: Whether your debt load is large or small, if you have trouble paying your bills each month, it’s not going to be feasible to try to pay off debt and save money at the same time. If this is the case, take stock of your spending habits and re-configure your Spending Sweet Spot to make repayment your priority. Figure out how to pay off your debt by cutting your spending elsewhere before you attempt to save. 
  • If you have a large amount of credit card debt: Credit cards have notoriously high interest rates, which means that not paying them off in full each month is going to cost you much more in the long run. If you have a lot of it, paying off credit card debt should take precedence over saving, because it’s the kind of debt that can be detrimental to your overall financial wellness. However, if you only carry a small credit card balance that is paid in full each month, making the choice between paying off debt or saving is much less complicated. 

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What’s the most effective way to pay off credit card debt, or other high-interest debts?

Credit card debt can be an unexpectedly slippery slope. Even if you only use it for emergencies, if you don’t have an emergency fund from which you can pay off your balance and avoid interest charges, the debt can start to pile up before you know it. If credit card debt or other high-interest loans are keeping you from saving money and achieving financial freedom, here are some of the best ways to pay off credit card debt:

  • Immediately stop making any additional charges to your credit card: Until you’ve paid off your bills, do not make any more charges to your credit cards.
  • Try the snowball or avalanche method: Both methods can help you pay off debt by strategically reworking your budget to tackle existing credit card debt. With the snowball method, you pay the minimum balance each month for every credit card, and then any extra money left over from your monthly budget goes toward paying off the credit card with the lowest balance. This method allows you to pay off credit card debt little by little, while building up to the card with the biggest balance – hence the name “snowball.” The avalanche method is more or less the same, but your extra money goes toward paying off the credit card with the highest interest rates first. Both methods can help you pay off debt fast, but the avalanche method will save more money over time. 
  • Consider a balance transfer: Some credit card companies will allow you to transfer your balance from one or multiple credit cards to another with a lower interest rate, which can help you pay off your credit card debt faster. 

What do I do if my debt situation is serious? 

If your situation is serious and you’re finding it hard to figure out how to pay off your debt, or if you’re unable to make your payments at all, then it may be time to enlist some help or consider alternatives to traditional repayment options. Please bear in mind that these options are only meant as a last resort after all of the above options have been exhausted and your debt burden is still unmanageable.

  • Talk to a credit counselor: A credit counselor can help you get started on a debt management plan that will allow you to make payments at an interest rate that is lower than what you currently pay, which can help you pay off the debt faster. Instead of sending money directly to the credit card company each month, you’ll instead send it to your credit counselor, who will make the payments on your behalf and keep track of your progress. It is important to note, however, that the counselor may collect a fee for their services, and that only unsecured debts, like credit cards and personal loans, are eligible for debt management plans, whereas secured debts like home loans are not.
  • Debt settlement, but only as a last resort: Debt settlement can help you pay off your debt faster than a traditional repayment plan because it’s essentially a concession on behalf of the creditor to accept a payment that is less than the total owed. While this may sound ideal, debt settlement has serious downsides and should only ever be a last resort, like when paying off debt by other means is all but impossible. Debt settlement can take years to accomplish, incur costly fees, and have a disastrous effect on your credit score. While it is an option for those who are in dire financial straits, it is not an option to take lightly.

Ultimately, establishing good money habits, keeping your overall debt low, and making regular payments each month to avoid falling significantly behind are the best ways to pay off debt, build your wealth, and enjoy financial freedom. 


Paying off debt - FAQ

What’s the best way to pay off debt fast?

The fastest way to pay off debt is by making debt repayment your major priority. Reexamine your budget and develop an aggressive repayment plan to help you meet your goal. This will probably mean pressing ‘pause’ on any saving and drastically cutting your non-essential spending so you can put as much money as possible toward repaying your debt. If you can’t consolidate your debt, begin aggressively targeting your debt with the highest interest rates first, while making the minimum monthly payments on the others. Once that debt is paid off, move on to the next, and so on – by doing so, you’ll be on your way to paying off that debt fast.

What is the best way to avoid going into debt?

While it might be impossible to never incur any debt, there are some ways you can avoid the kind of debt that can be very damaging to your credit score and your overall financial wellness. Credit cards and personal loans are two kinds of debt that can have a disastrous effect on your finances if not managed properly or avoided entirely. To avoid going into too much debt, it’s important to live below your means and save more than you spend, to build a robust safety net for emergencies, and to always make sure you pay bills on time and in full each month. 

What do I do if I can’t pay off my debt? 

If you have enough debt that it’s interfering with your daily life and you’re not sure you’ll be able to pay it off, there are still some solutions. The first is to continue reevaluating your budget and reducing your spending to essential spending only – anything extra should immediately go toward making your minimum monthly payments to pay off your debt. If you’ve already done everything you can to reduce spending and you still can’t pay your bills, then consider talking to a credit counselor or negotiating directly with the creditor to see if debt consolidation or settlement are the right options for you. Finally – and only as an absolutely last resort – you may want to consider filing for bankruptcy.

Once I finish paying off debt, what should I do?

First: celebrate! Paying off debt is a major accomplishment and doing so puts you one step closer to financial stability and freedom. Once all of your debts are paid off, you can begin to take that money that was being put toward debt repayment and use it for other things. However, it’s important not to think of it as extra disposable income – consider taking that money and saving it instead, whether for an emergency fund, retirement savings, or even a future down payment on a house. But whatever you do, continue to keep a close handle on your finances and avoid taking on any more unnecessary debt!



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