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Strategies to Pay Down Debt


Debt can be a difficult animal to tame but if you approach debt repayment with a plan and stay the course, you will be able to pay down
debt and it will be easier than you think. Use these strategies to help pay down debt sooner.

Borrow at a Lower Rate

Much like refinancing your mortgage at a lower rate, you can refinance your personal loans, credit card loans, auto loans and any other kind
of loan to a lower rate. Whenever the interest rate comes down, look at opportunities to refinance your loan and reduce your interest expenses. If you maintain your payment level after refinancing at a lower rate, you will be able to pay down debt much sooner. Make use of 0% APR loan offers you get in mail and transfer some of your balance to these offers. This will reduce the interest burden on you temporarily.

Stop eating out

How much do you spend on lunch and dinner. Let’s say if you work for 230 days in a year and eat your lunch outside. If you spend anywhere from $5 -$10 per meal, you are going to be out anywhere from $1150 – $2300! Wow and that just for one person and not taking in to account dinner. Start cooking at food and leave eating out to occasional events. You will do your wallet a favor and your health too.

Make it a challenge

Games motivate people. If you can make paying down a challenge, the player in you will rise to the occasion. Give yourself a reward after achieving milestone in the debt elimination process. These gifts don’t have to cost too much; just make sure its something you value personally and it will keep you motivated to reach the next milestone.

Don’t spend all of your income

Where will the money to pay back debt come from? From your income! So make it a point to spend less than what you are earning. Even if you have to make some difficult choices, do it. Once debt free you will have spending opportunities which you can truly enjoy.

Use up your gift card:  If you have gift cards lying around, make sure to use them. It is cash sitting around that is not working for you. If you have no use for the gift cards, sell them on eBay or plastic jungle and use the money to pay down debt.

Sell old items

Are you collecting items that you are not using? Do you have a wardrobe which is full of clothes you no longer wear? Get rid of these old items. You can donate them to charity and get a receipt and take a tax credit (please consult with your tax advisor for more details) or you can sell them via a garage sale. This will help you collect some money from things you were not using.

Divert any salary increases or bonuses to paying down debt

Odds are you have developed a way to manage your expenses in your current salary, so any increase in salary or bonuses can go towards paying debt down.

Borrow from your retirement account

This one is tricky and you should only consider this after you understand all the rules and regulation concerning the type of retirement account. Many 401K account providers let you borrow from your own retirement account and pay an interest. Often the interest rate is lower than what you can expect on a personal loan and you are paying interest to yourself rather than someone else. This can be risky as one of the general rules for such accounts is to have all the money back in the account within 30-60 if you leave the job or get laid off.

Make a budget

Paying debt down without a plan can be difficult and a budget is a financial plan. Use a budgeting template that will help you make a budget quickly and try to stick to the plan you created. You can make steady progress by making sure you allocate your cash flow properly to paying debt and to your current expenses.

Stop building more debt

If you are trying to pay down debt, stop adding to it. This would mean not buying anything on your credit card that you cannot pay for in full, not buying a car on loan. If you have a set target, a fixed amount of debt, you can make a plan and work towards paying it down. If you keep on adding to the debt it will become a cat and mouse game.

Stop listening to ads

Marketing is a very powerful tool that create wants and needs that actually never exists in the first place. If you fall prey to marketing gimmicks,
then stop seeing ads on TV (change the channel or put TV on mute), don’t read ad in print and on internet. You will save money by not getting lured in to making frivolous purchases.

Do you have any tips to pay down debt? Have personal debt payback story? Are you trying to payback debt? Join the conversation in the comments section.

Author Bio: Rohit is the founder of After working in the financial industry for five years he started The Money Mail where he writes about various topics related retirement planning, earning more and managing you career.

Get Out of Debt


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. Eating out less is the number 1 thing that we’re working on! 🙂

    • Probably helping lead a healthier life as well!

  2. 99 times out of 100 I would not advise borrowing from a 401(k). I would probably take that right off the list if it were me. I think saving and paying down debt are two worthwhile strategies and one should not be sacrificed for another.

    One thing I would do is to set milestones along the way toward debt freedom. Instead of saying ‘I want to pay off the credit card!’ which is probably a couple of years of work, set milestones along the way that will let you see and celebrate the achievements. Setting a goal that’s way far out increases the chances of losing your motivation along the way.

    • I have to agree with MoneyBeagle.

      After all if you’re faced with a job loss, that money either needs to be repaid within a short time or becomes taxable money.
      Borrowing at a 0% offer is great, but don’t forget transaction fees. They can be 2%-5% of the principal. If that’s for a year, try your darndest to pay it off in that timeframe.
      I can remember getting offers for 3%-4% until it’s paid in full which is even better since it’s like getting a fixed rate personal loan.

      • I have agree with the points you have raised. However I think if you have some high interest rate debt and you can take some money from your retirement savings account to pay those you are probably better off. Yes the money has to be paid back almost instantaneously if you were to loose your job or it can become taxable but the high interest rate debt is probably killing your finances.

  3. I pretty much stick to those guidelines already minus the 401k borrowing and it works just as you describe. I even added a second job working just weekends nights at a high end restaurant and all that extra is strictly for debt pay off. It’s amazing how quickly you can pay down debt when you focus on every bit of income you have and where it is being put.

  4. Great post. Basically, STOP EATING OUT is the huge one. Once I started asking friends about how much they spent on this, my jaw dropped. Anywhere between 300-800 a month over here! A great way to save.

    • @Jules: Which ones work for you the best? Are you using balance transfer offers?

  5. I definitely have worked to reduce my dining out budget, use what I have and get creative when it comes to bringing in extra money. I’m also a fan of turning these types of efforts into a game–it’s a great win-win challenge!

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