How to Get Out of Debt Faster, Part 1

Money Girl’s 5 easy tactics to pay less interest, save more money, and create a more secure financial future.

Laura Adams, MBA
5-minute read
Episode #254

If you’re like most people, you want to ditch your debt as quickly as possible without having to take a second or third job. Having too much debt can be a real burden that holds you back from improving your financial life.

How to Get Out of Debt Faster

When it comes to getting out of debt, there are 3 basic strategies:

  1. Don’t increase it
  2. Reduce the interest rate
  3. Reduce the principal balance

In this post, I’ll cover specific tactics to reduce the interest rate on your debt. And next time, you’ll learn how to reduce your principal balances.

How to Reduce the Interest Rate on Debt

The interest rate is the cost of borrowing money. It’s the amount you’re charged in addition to the principal amount you borrow and it depends on several factors including:

  • the current market interest rates
  • your credit score
  • the length of the loan
  • the amount you borrow
  • the type of credit account

How a Lower Interest Rate Saves Money

Say you get a car loan for $20,000 with a 15% interest rate over a 5-year term. Your monthly payment would be about $475. If you got that same loan at 6% interest, your payment would be about $385, saving you $90 a month, or more than $5,000 over the life of the loan.

Think about what you could do with that money! If you invested $90 a month for 5 years and never added another penny to the account, you’d have over $30,000 in 20 years, assuming an 8% average annual rate of return.


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.