10 debt payoff hacks that will make your loans disappear faster

As such, debt is nothing negative. It can be a highly useful tool for investments, housing, and other purchases. The major challenge is to retain control over your debt. 

Adequate debt management doesn’t require elaborate tricks, schemes, or other supposed “wonder weapons”. All you need is a healthy combination of discipline, planning, and the right priorities. 

10 debt payoff hacks that will make your loans disappear faster - salary and loans sign

My 10 most successful debt payoff hacks 

Whether you’re paying off a mortgage, a vehicle, or a lavish shopping spree, here are 10 debt payoff hacks that will make your loans disappear faster. 

1. Always pay on the 1st of the month

This very simple rule will give you no choice but to prioritize debt payoffs. Before the month even starts, you’ll know where a fraction of your money has to go. 

Paying on the 1st of the month also works well in the context of monthly budgeting – you’ll be forced to take debt payoffs into account prior to other expenses. 

2. Pay more than the minimum 

As a rule of thumbs, increasing your monthly payments can be beneficial on multiple levels. The obvious advantage is the shortening of the repayment period but there is more. 

You’ll improve your credit rating with the bank and inspire trust. This will shift the odds in your favor for future loan negotiations.

In addition to the relation with your bank, paying more than the minimum will also boost your mentality toward debt. You’ll celebrate a personal win every time you wire a monthly payment. 

the best debt payoff hacks - Pay more than the minimum - glass building

3. Have a 12-month debt repayment plan 

Every year, you should set target payoff amounts for all of your loans. This will help you stay on track with monthly payments and also provide flexibility if you encounter a tough month. 

The target amounts should reflect the nature of the loans. Does it make sense to pay off a certain loan quickly to beat the creditor’s expectations? Do you have tax gains if you pay off slowly? Are these tax gains high enough to undermine the goal of becoming debt-free? Is the payoff money better invested in other assets? 

All of these questions should determine the merits of paying off quickly. 

As an example, I once had to pay off a student loan with a very small interest rate. The monthly payment was equally insignificant. In these circumstances, using the liberated cash to invest in other assets felt like a wiser choice, especially since I was able to deduct the interests from my taxable income. 

Consequently, it wouldn’t have made much sense to pay off that loan super quickly. The only benefit would have been the previously mentioned mental satisfaction. 

4. Don’t buy consumer goods on credit card debt or other loans

A cardinal rule for most budgeting devotees, avoiding consumer loans is one of the most effective debt payoff hacks.

There is no benefit in using borrowed money to buy things that will decrease in value or completely disappear over time. As an instrument, debt should be used to finance assets, not liabilities. 

In this vein, car loans are the enemy of a debt-free existence. After having completed the 4-year payoff scheme, you’ll likely want a new car because it will seem “earned”. You’ll reward yourself for having paid off the loan with another loan. 

The same goes for clothes, parties, and holidays. All of these things should be purchased with your money, not someone else’s 

By ridding your accounts of consumer debt, you’ll be able to focus your resources and energy on the debt that truly advances your life. 

After all, accelerating your mortgage payoffs will be worth much more in the long haul than fancy shoes or the “hottest” new handbag.

5. Reward yourself every time you pay off a chunk

As a mental stimulus, small rewards work well as debt payoff hacks. The challenge is to avoid the trap of celebrating debt reduction with more debt.

As an example, if you have eliminated your credit card debt, don’t reward yourself with another shopping spree. Try to find other ways to honor your achievements. These can involve non-monetary activities like relaxing in nature or quality time with friends. 

Personally, I love taking an entire day off and read books to reward myself for financial wins. This might sound mundane to most people, but since I don’t have a lot of “lazy” days, I get more satisfaction from chilling from time to time than from material perks. 

debt payoff hacks - reward yourself every time you pay off a chunk - mountains in USA with bench
Photo by Dave / Unsplash

6. Put work bonuses toward debt reduction

Another great way to boost your debt payoff schemes is to use extraordinary income. Most people don’t frequently receive work bonuses, monetary gifts, or refunds. 

Because these incomes are unexpected, we tend to use them for lifestyle upgrades or pleasure-orientated consumption. This is highly detrimental to our debt reduction goals. 

Financing luxury purchases with extraordinary income prevents us from taking advantage of the income’s extraordinary nature. We simply use it to satisfy temporary wishes. 

By incorporating it into our debt reduction plans, on the other hand, we fully capitalize on the revenue’s singularity. We use it to improve our finances, thereby reaping a long-lasting benefit from temporary proceeds. 

7. Recognize the nature and different types of debt

Credit card debt, car loans, mortgages, investment loans, and other types of debt do not have the same properties and objectives.

When devising our repayment strategy, we need to recognize what kind of loan we are dealing with. For instance, using long repayment plans to pay off consumer debt is generally a bad idea because of surging interest rates.  

Mortgages, on the contrary, usually have lower interest rates and are no good if you don’t have a long and well-structured repayment plan. 

If you cannot shoulder a 25+ year real estate loan, renting might be a more viable option. Remember the subprimes?  

2008 demonstrated why giving real estate loans to people without stable salaries is a bad idea. Taking them is an equally fallacious choice. 

For a more thorough analysis of various forms of debt, read The Total Money Makeover by Dave Ramsey

8. Cancel a couple of credit card subscriptions 

Credit card subscriptions are a nightmare in the context of budgeting and debt reduction. They come with little to no flexibility and force us to pay a certain amount regularly without taking into account the actual usage of the relevant service.

Canceling a few of them will help you regain control over your credit card expenses – ie your consumption loans. 

Aside from the financial argument, scrapping a number of subscriptions will further your mindfulness when it comes to online presence.  

9. Have a proper budget and factor in debt reduction 

To become adept in personal finance, budgeting is not a luxury. It is a must. Start by classifying your expenses into separate sections and create a “debt reduction” category. This will clearly define your monthly payoffs as a recurring expense. 

If you are a budgeting novice, the 50 – 30 – 20 method is a great tool to start with. It works well for people with regular income streams and divides expenses into intuitive groupings. 

10. Change your lifestyle (a bit) 

Finally, even the best debt payoff hacks won’t reduce your loans if you live above your means. Unfortunately, living above our means has become all too common in 21st-century America.

We tend to believe that because something is marketed to our specific income bracket, we can afford it. Certain types of cars are culturally associated with a particular income range. Once you earn more, you need a better car. 

The same goes for houses, clothes, and holidays. Because you are constantly driven to upgrade your current possessions, you decide to enter the so-called rat race. 

If you want to prioritize debt reduction and intelligent budgeting, you should always live below your means. You don’t have to buy things just because you can afford them. Nor should your “status” warrant a certain price bracket.

As many billionaires and entrepreneurial greats will tell you, consuming under your supposed price range will lead to more sound finances in the long run. 

Your total debt in relation to your earnings and savings is usually a good indicator of whether you should downgrade certain aspects of your lifestyle.

debt payoff hacks - live below your means - Dubai traffic jam

Useful links on the best debt payoff hacks 

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