How to lower debt? Pay it down as fast as possible. Cutting your debt can be as simple as making more money than your spend, and using it to pay your debt off instead of saving it.

Reducing your debt is one of the quickest ways to financial freedom. Just because lowering debt is simple doesn’t make it easy, so let’s get started.

Different Types of Debt

There are two types of debt in this world – good debt and bad debt. While it’s best not to have any outstanding financial obligation (except for cashing checks) , every country in the world is in some form of debt. The US is in a lot of it – more than 100% of it’s yearly GDP (Gross Domestic Product).

The entire world’s economy is based on debt. Debt allows for financing of large projects – increasing economic growth. That growth and completion of large projects creates assets, income and capital. The people that win this game of finance understand the two types of debt

Assets – the Good Debt

Assets are the best debt to have, allowing you to leverage your income, capital (money) and credit to acquire assets. They are tools or property that retain, enhance or grow in value. They serve a utility, and can be easily sold on the open market.

Consumer Credit – the Bad Debt

Consumer debt is debt from buying a service or good that has or added little value that can be converted into money again. Think of an expensive diner or trendy outfit. The dinner is nothing more than a memory and perhaps some belly fat. A trendy outfit is hard to sell even for a fraction of what was initially paid.

Consumer debt is typically unsecured loans and revolving credit lines. These types of credit also tend to have the highest interest rates too!

How to Lower Debt Quick

You should try to lower your debt as quickly as possible. Doing so will put you in a good position to make larger purchases like a car or house with the best interest rates available. Typically, people with less debt have higher credit scores.

Still, you are going to want to have some cash reserves because emergencies do happen. If you loose your job or other source of income, having liquid cash will keep your from missing payments.

Here are some ways to reduce your debt quickly:

Spend Less Money

If you spend less money each month, you can use that money to pay down your debts. Putting off purchases, buying in bulk, buying used items over new are some simple ways to spend less money. Working or studying a new skill can also keep you from spending too much on entertainment and frivolous purchases.

Cut Your Bills

If you cut your bills, you’re lowering your monthly payments. You can use that extra money to pay down your debt. Saving money on your bills requires a little work, but can add up to thousands of dollars a year.

You could cut out tv service, or get a digital phone (See best VoIP Providers) to save a good chunk of change, but every homeowner needs an internet connection to stream or make calls. You can save $200/year off your internet service by getting your own Wi-Fi Modem.

Make More Money

Many times, there is nothing left to save. You just have to make more money. Working more hours, starting a side hustle, getting a second job are all good ways to increase your income. Selling things that you already have will help bring down balances accruing interest.

Reducing Credit Card Debt

Lowering your high interest credit card debt is one of the fastest ways to reduce your overall debt and increase your credit score.

Consolidate Your Credit Card Debt

Taking out a loan reduces your debt through lower interest payments. There are plenty of Internet companies which can provide debt consolidation services for you without lots of underwriting hassle. Be aware that not all small online firms are reputable, check with the Better Business Bureau to authenticate any potential debt consolidation partners.

Alternatively, you can take out debt consolidation loan through your bank or funnel stored up home equity into a debt consolidation agreement.

Credit Card Debt

Balance Transfers

Transferring a high APR credit card balance to a card with a low promotional rate can a lot of money. You can use these savings to further reduce your balances on other high interest debts.

If your credit is decent, you can get 0% balance transfers for 12-18 months. There are additional fees now, typically 3-5% of the amount transferred. Even with those fees, there is a lot of room for savings doing a balance transfer strategically.

Negotiate With Your Creditors

You can try negotiating directly with creditors or mediating a negotiation through a third party. While not all creditors will consent to reduce your rates or let you off the hook for some of your debt, negotiation is often worth a shot.

Getting a lower interest rate is the best outcome as it won’t affect your finances in a negative way. If you get your debt discharged, it may affect your credit report. You may also be liable to claim discharged debt as income, which would affect your tax liabilities.

It is always best to speak with a tax professional in these matters and to look at all aspects before you make a decision.

Reduce Your Debt With Legal Action

Another way to obliterate credit card debt is to fight it. If you believe that you’ve been unfairly charged for services or inappropriately targeted for higher rates, you may have recourse, both through internal credit card company processes and through state, local, or federal law.

Disclaimer: We are not lawyers, and this is not legal advice. This is just a way you could potentially reduce or eliminate your debt if there is reasonable cause. Please consult a legal professional and do your research before taking or avoiding any action.

Bankruptcy Can Eliminate All Debt, Fast

If you are in too much debt to financially handle, you can file for bankruptcy to reduce, restructure or eliminate some or all of your debt.