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Last Updated February 12, 2020

In this article, I explain how you can pay debt faster even if you’re living paycheck to paycheck. I can personally relate to how it feels to be buried in debt, because I had a 6-figure debt (that was not tied to a mortgage). I had to dig myself out of debt, and I will show you how you can too.

free debt payoff tracker

Is It Better To Pay Off Debt Or Save Money?

Before we get started, I want to address if you should even be paying off debt or if you should be saving money. If you do not have at least $1,000 emergency fund savings, you need to be focusing on saving money.

I recommend you have 3-6 months worth of an emergency fund, but $1,000 is the bare minimum you should have before even considering paying off your debt.

You don’t want to meet your financial goals, and then get thrown off by an emergency. You should have enough cash available to help you through emergencies without having to rely on high-interest loans.

pay debt faster

I purposely put the step of paying off debt after saving because creating an emergency fund should be a top priority. This needs to be established before you start paying off debt.

But once you have accomplished building your emergency fund, you should use any additional money towards paying down your high-interest debt.

If you already have an emergency fund set up, I would focus on paying off high-interest debt before saving for other financial goals (such as saving for a house or your child’s education).

Related Article: Paying Debt Vs. Saving: Which Is Best?

Try To Reduce Your Debt and/or Interest Rates

If you have an extremely high debt or interest rate, to the point that you feel like you are not making any progress, I would work towards reducing your debt and/or your interest rates. Here are some steps you can take to reduce your debt or interest rate so you can pay debt faster:

Balance Transfer

If you are faced with a mountain of high-interest debt, consider doing a balance transfer or taking out a personal loan. This strategy can be a powerful tool, but only if used right.

I must warn you that if you do not have a plan in place, instead of getting out of debt, you may end up damaging your credit. Therefore you MUST have a plan before taking this option.

With many balance transfer offers, you can secure 0% APR for up to 15 months. But, you might need to pay a balance transfer fee of around 3% for the privilege. However, it is possible to find a credit card company that does not charge a balance transfer fee. 

You can find a list of the best balance transfer credit cards HERE.

pay debt faster

Instead of transferring all your debt, only transfer the amount of debt you are confident you can pay off completely during the 0% grace period.

If you do not think you can pay off your debt completely during the 0% grace period, I would still consider transferring your balance under the following circumstances:

  1.  If there is no balance transfer fee, and
  2. The interest rate with the new credit card company is lower than your current credit card company after the grace period has expired.

Before doing a balance transfer, consider things like:

  1. The length of your credit history,
  2. How many recent inquiries you’ve had, and
  3. What your credit utilization ratio looks like.  

All of these things impact your credit score. If you have an extremely low credit score, doing a balance transfer might not be an option.

Take Out A Personal Loan

If a low credit score prevents a balance transfer from being an option, consider taking out a personal loan. You can use an unsecured personal loan to consolidate debt.

An unsecured loan means you do not have to put up any collateral like your house or car.

Consolidating higher-interest debts using a personal loan can save you money in the long run.  It brings all of your debt under one new (and preferably lower interest) umbrella. There’s also the convenience factor of only having to make one monthly payment.

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Online lenders typically let you apply for a debt consolidation loan without a “hard inquiry” on your credit.

Hard inquiries will affect your credit score. Therefore, make sure you apply with lenders that use a soft credit pull so you don’t inadvertently impact your credit score in the process.

You can find a list of online lenders HERE.

Negotiate A Lower Interest Rate

If you can’t do a balance transfer or take out an unsecured personal loan, you can call your creditor to negotiate a lower interest rate. If you have a good history of paying your bills on time, there is a good possibility that they will grant your request, and lower your interest rate.

Don’t just assume your creditor will not cooperate. Take a chance and ask for a lower interest rate.

The worst that can happen is they say “no” and you are in the same position as before. You have nothing to lose and so much to gain by negotiating a lower interest rate.

Negotiate A Lower Debt Balance

If the amount of debt you owe is just too high and overwhelming, therefore you cannot afford to pay it no matter how much your creditors reduce the interest rate, consider negotiating a lower debt balance with your creditors.

You can read some strategies for negotiating with creditors HERE.

This is a great article because it gives you advice on how to negotiate with the particular type of creditor you may have—for example, mortgage companies, car loans, student loans, credit card companies, back taxes, etc.

How Can I Pay Debt Faster With A Low Income

Budget Categories And Percentages

Create A Budget

The first thing you need to do is create a budget that works. Having a budget allows you to monitor your spending and see where your money is going. This will give you valuable information on what areas you can cut back on spending.

If you’re just starting out, you can download this FREE Monthly Budget Worksheet

However, if you want to get serious with your saving and need something a little more sophisticated, you can get these Monthly Budget Template.  This is the template I actually used to save over 50% of my income and it is the same template I use to this date.

Monthly Budget Template
My Monthly Budget Template


Cut Expenses

After you make your budget, you need to make sure to track your spending regularly. Track your spending by keeping receipts and writing down all of your purchases. You cannot rely on your memory to keep track of your spending.

Use this FREE Daily Expense Tracker to help you with that.  Print out multiple sheets (one for each spending category or sub-category).  Then put all your sheets in one place (like a binder or folder).

free daily expense tracker

If you hate logging your spending, I recommend you try Personal Capital to help you track your spending. Personal Capital is a free online platform that automatically tracks your spending by linking your credit cards and bank accounts.

All of your transactions are loaded to your Personal Capital account, and you can see all of your finances in one place. The only disadvantage is you have to manually enter any transactions where you used cash.

It takes about 15-30 minutes to set it up in the beginning (depending on how many bank accounts and credit cards you have), but once you set it up you can forget it. 

Once you have a working budget and you’re tracking your spending, it should be clear what areas you tend to overspend. Make a conscious effort to cut expenses in that area.

If you want to pay off your debt faster with a low income, you have to cut some of your expenses.

Focus On Cutting Largest Expenses First
I would focus on cutting your largest expenses first. What are the three budget categories you spend the most in?

At this point, it should be easy for you to answer this question because you can refer to your budget.

These Monthly Budget Template makes it clear how much of your income goes to what expense. It shows you exactly what percent of your income is being spent on each budget category. This makes it very simple for you to decide where you need to cut back at a glance.

For most of us, our three largest budget categories are housing, transportation, and food. I recommend putting all my energy in trying to get those expenses as low as possible.

By focusing on the larger parts of your spending, you are able to make the most impact when deciding to cut back.

Keep in mind, I’m not saying you should not focus on the smaller categories at all. I’m just saying I would focus on cutting my expenses in my high spending categories before I turn to cutting my small expenditures.

How to Make a Budget

Next, Focus On Small Expenditures

After you reduce your expenses as much as possible in your three largest budget categories, see if there are any ways you can cut back on the smaller things.

An easy way I like to save money on my smaller expenses is by using online coupons and rebate sites. This helps me to save money any time I shopped in-store or online.

Two great cashback websites I use are Ebates and Ibotta.  If you don’t have an account, sign up right now! It is literally FREE money.

When you sign up right now and purchase something you will get a $10.00 bonus from Ebates and Ibotta. 

If you prefer to shop on your phone, I recommend you download the app Drop.  Drop is the FREE app that’s giving out millions in cash rewards for the spending you do every day.

Earn More Money

pay debt faster

In order to pay debt faster on a low income, you need to try and earn more money.  In other words, if you’re not paid well, you need to increase your income. 

For example, you can increase your income by:

  • Making more money in your current job;
  • Moving to a company that may offer more room for advancement;
  • Finding a part-time job;
  • Starting a side hustle or part-time business; or
  • Establishing passive income.

So, find a way you can increase your income today.

Related Article: 5 Ways To Increase Your Income Streams

What Is The Fastest Way To Pay Off Debt


Stop Spending


If you really want to get out of debt, you first have to stop spending.

If you have a spending problem, I suggest you stop using your credit cards for your discretionary spending and use cash with the envelope method or pre-paid cards.

Cut up your credit cards—but don’t close your account—if the temptation to spend is too much for you to handle.

Another method you can use is freezing the cards in a cup of ice. By the time you are able to access them again, hopefully, you will have changed your mind about spending.

Target Your High-Interest Debt

Debt is a drain on your finances and slows down your achievement of financial freedom. As a result, you want to pay off any high-interest debt first and as quickly as possible.

I consider any debt with an interest rate above 8% to be “high interest.”

The reason why I would pay off any debt with an interest rate above 8% is because the stock market has returned about 8% over the long haul. Paying off a debt with an interest rate greater than 8% is equivalent to getting a guaranteed return of more than 8% on an investment. Therefore, paying off your high-interest debt above 8% will most likely give you a better return on your money than investing in the stock market.

Once you pay off all your date with an interest rate above 8%, it’s up to you if you want to pay off your lower interest debt or make your money work for you in other ways.

Making A Debt Repayment Plan

pay debt faster

Start With The Highest Interest Debt First

Gather all your debt together, such as your student loans, medical bills, credit cards, tax debt, car note(s), etc. Determine how much you owe and at what interest rate. Write it down and make a list of your debt from highest to lowest interest rate.

I suggest you start by paying off the debt with the highest interest rate (even if it is the debt with the highest amount). This is because it makes the most financial sense and you pay less in interest.

For your lower interest debt, pay only the minimum monthly payment while you are focusing on paying down your highest interest rate debt.

Once you have paid off one debt completely, take the funds that are now freed up and apply it to the next debt in line until that is completely paid off, and then repeat again.

This method is commonly called the debt avalanche system.

pay debt faster

For example, let’s say you have the following outstanding debts, which I listed from highest to lowest interest rate:

  • Credit Card: $5,000 (20% interest rate) – assume $200 minimum monthly payment
  • Student Loans: $30,000 (10% interest rate/10 year loan) – assume $400 minimum monthly payment
  • Car Note: $15,000 (8% interest rate/5 year loan) – assume $300 minimum monthly payment
  • Student Loans: $10,000 (7% interest rate/10 year loan) – assume $100 minimum monthly payment
  • Mortgage: $250,000 (6% interest rate/30 year loan) – assume $1,500 minimum monthly payment

I will presume you reduced your expenses and increased your income; therefore, you have $500 leftover after paying the minimum monthly payment for all your debt. You should apply that extra $500 towards your debt as follows:

  • Credit Card: $5,000 (20% interest rate) – $200 minimum monthly payment plus extra $500 per month ($700 total monthly payment)
  • Student Loans: $30,000 (10% interest rate/10 year loan) – $400 minimum monthly payment
  • Car Note: $15,000 (8% interest rate/5 year loan) – $300 minimum monthly payment
  • Student Loans: $10,000 (7% interest rate/10 year loan) – $100 minimum monthly payment
  • Mortgage: $250,000 (6% interest rate/30 year loan) – $1,500 minimum monthly payment

After 8 months you would completely pay off your credit card bill. Once you pay off your credit card bill, you should pay off your remaining debt as follows:

  • Student Loans: $30,000 (10% interest rate) – $400 minimum monthly payment plus $700 that you used to pay off your credit card bill ($1,100 total monthly payment)
  • Car Note: $15,000 (8% interest rate) – $300 minimum monthly payment
  • Student Loans: $10,000 (7% interest rate) – $100 minimum monthly payment
  • Mortgage: $250,000 (6% interest rate) – $1,500 minimum monthly payment

After 2 years and 8 months, you would completely pay off your high-interest student loans. Then you could use this same method to pay off your car note, student loans, or mortgage if you choose.

Use Software To Help

pay debt faster

If you’re like me, you like to use paper and software to help you with your financial journey.

For those of you interested in using technology to help with your debt repayment plan check out Tally. Tally is an automated debt manager that makes it easy to save money, manage your cards and pay down balances faster.

Another option is Undebt.it. It is a FREE tool to help you get out of debt. There are SEVEN debt payoff plans you can choose from (including the debt avalanche and debt snowball method). You can even compare the different payoff plans to see which is best for you or make your own custom plan!

They also have debt payoff calculators, which is also FREE. You can keep track of all your payments and your debt payoff progress in one place.  This software is so AWESOME and absolutely FREE! I haven’t come across something this good in a while!

You can also sign up for the premium account that has more features for you to take advantage of. The premium account is $12 for the entire year (only $1/month), which is still very affordable.

There’s a 30-day FREE trial if you want to check out the premium account. What I would do is sign up for the free account first, and then click on the free trial to check out the premium features. If you like it, then sign up for the premium account.

Speed Up Paying Off Your Debt

You can also use an app like Qoins to help you automatically pay off your debt even faster. You’ve likely heard of apps that turn your spare change into investments (like Acorns) but Qoins is an app that takes that change and uses it to pay off your debt.

Qoins will send out payments according to the schedule that you’ve set up. They also track how much you’ve paid out towards your loans and see how much of a dent you’ve put in your debt.

I highly recommend Qoins if you want to speed up paying off your debt, while making it as easy and painless as possible.



No matter how much debt you have, it is important to make a plan to find your way out. Before you consider paying off your debt, make sure you have an emergency fund set up. When starting your debt repayment plan, try to reduce your debt and/or interest rates. By making a budget, cutting expenses, and increasing your income, you can pay debt faster.

Finally, you need to stop spending and target paying off your highest interest debt first. Sign up for Undebt.it to help you make a debt repayment plan, and then use Qoins to speed up that plan. Getting out of debt certainly will not happen overnight, but you will eventually be debt-free if you make a plan and stick with it.

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