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7 Ways To Reduce Your Debt

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Reducing personal debt is a crucial step toward achieving financial control and freedom. Although it seems daunting, it’s possible to reduce your debt and improve your financial wellness


This step-by-step guide will provide you with practical strategies for assessing your debt, creating a repayment plan, and making lasting changes to your financial habits.

1. Assess Your Debt

The first step to reducing your personal debt is to list all your debts, including credit cards, personal loans, and any other outstanding balances. Note the interest rates and minimum payments for each debt. One good way to assess your personal debt is to request your credit report. 

Some Common Sources of Debt

  • Payday loans: These short-term loans are expected to be paid back by the next paycheck and can have interest rates as high as 400% or more.
  • Overdraft fees: Although these aren’t loans, the fee for a small overdraft can be essentially a triple-digit interest rate.
  • Rent-to-own agreements: Stores commonly charge up to 100% interest for things like furniture and appliances.
  • Credit card debt: These commonly have interest rates between 20% and 30% and fees.
  • Medical debt: High healthcare costs and lack of comprehensive insurance can lead to significant medical bills. 


These types of debt often result from a combination of low wages, irregular work hours, outdated pay cycles, lack of benefits, and unexpected expenses. 


2. Negotiate With Creditors

After you’ve gone through your credit report and listed all your debts, it’s crucial you ensure everything is correct. If you find any errors, you can file a dispute and get the debt removed from your credit report. You can also ask for lower interest rates or about hardship programs and repayment plans. Some merchants and creditors will be willing to work with you if it gives them a better chance of getting their money.

3. Create a Debt Repayment Strategy

After you negotiate and create a final list of the exact interest rates, minimum monthly payments, and total amounts, it’s time to create a repayment strategy. The best way to tackle debt is to utilize a repayment strategy that prioritizes high-interest payments.

Common Repayment Strategies for High-Interest Debt

  • Debt avalanche method: List debts from highest to lowest interest rate and pay the minimum on all debts except the highest-interest one. Put extra money towards the highest-interest debt, and once the highest-interest debt is paid, move to the next highest.
  • Debt snowball method: List debts from smallest to largest balance and pay the minimum on all debts except the smallest. Put extra money towards the smallest debt, and once the smallest is paid off, move to the next smallest.
  • Debt snowflaking: Apply any extra, unexpected money (tax refunds, gifts, etc.) to debt.
  • Debt consolidation: This involves combining multiple debts into a single loan or credit card with a lower interest rate. This simplifies your payments and lowers your overall cost.
  • Balance transfer strategy: Transfer high-interest credit card balances to a card with 0% intro APR and pay off debt during the 0% interest period.


You can also combine elements of different strategies to find one that works for you, which is the most important aspect of creating a strategy.

4. Create a Budget

Now that you have a strategy to pay your debts, you need to find the money to repay those debts. The first step is to track your income and expenses and identify areas where you can cut costs. Go through all your bank and credit card statements and cut everything that isn’t essential.


5. Avoid New Debt

Use cash or debit cards for purchases until you’ve fully paid down your credit card debt. It may be a good idea to open up a new line of credit in order to pay down existing debt but don’t open any new lines of credit for anything else.

6. Explore Additional Sources of Income

Look for overtime opportunities or consider picking up more shifts at your job. You can also consider selling any unused items sitting around.

7. Leverage Free Financial Resources

Learn about personal finance through free online resources or consider meeting with a free financial counselor.

Online Resources for Managing and Reducing Debt


Monitoring your credit and actively working to reduce debt are crucial steps in maintaining financial wellness. 


Reducing debt frees up your income, lowers financial stress, and puts you on a path to long-term financial stability. By staying disciplined about your credit and managing your debt, you’re investing in your financial future and opening doors to greater financial freedom.


All information herein is for educational purposes only and should not be relied upon for any other use. The information herein does not constitute the rendering of financial, business, accounting, securities, tax or legal advice or other professional advice by DailyPay. No fiduciary obligation or duty exists, or is created, between you and DailyPay. DailyPay does not warrant the completeness or accuracy of any information provided to you.

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