Reducing the amount of debt you have can save you money while also improving your credit.
We recommend focusing on paying off your highest interest-rate debts first - this strategy is called the “avalanche method”.
There are a few potential strategies you can consider to pay down debt faster:
- Balance transfer credit cards offer a 0% introductory rate for a certain period of time. Generally these require good or excellent credit to qualify, and typically there’s a fee of 3% charged for the transfer.
- Debt consolidation loans offer a fixed monthly payment amount and interest rate. Generally, consumers who get the lowest interest rates are those with good or excellent credit. You can read more about debt consolidation loans here.
- A home equity line of credit is an option if you’re a homeowner, and good credit is not required. The repayment terms tend to be long, but there is a chance of putting your house at risk if you don’t make payments.
- A 401(k) loan is not generally recommended, since this can put your retirement security at risk and there are high fees if you’re unable to pay the loan back. If you lose or quit your job, the loan would be due within 60 days.
If you’re feeling overwhelmed by debt and you’d like one-on-one help managing it, you can also reach out to the National Foundation for Credit Counseling at (800) 388-2227.
Registering for a NerdWallet account enables you to track changes to your credit report and keep a pulse on factors such as your credit utilization and the total amount of debt you have. You’ll also get access to our credit simulator, which estimates how certain actions could impact your credit score, such as making payments on time, reducing balances by a certain amount.
Here’s a few other NerdWallet resources that can help you build the debt payoff plan that’s right for you: