pay-off-debt

The secret guide to getting out of debt

Pay off your debt using these top tips.

8 February 2016: As living prices increase gradually it's not surprising to note that many Aussies are stressed about their finances and end up in debt. The latest data from Mortgage Choice showed 52.4% of Aussies are “very worried” about their finances, an increase from 45% in 2014.

Here are some key tips to help you pay off your debt.

  • Pay off your non-tax-deductible debt first

Non-tax-deductible debt, or “bad debt”, is money you owe on something that won't give you any money back from that particular investment. A personal loan is a type of non-tax-deductible debt.

Pay this debt first and you’ll lower the interest connected with these debts and boost your cash flow. You’ll be stronger financially so you can put money towards your tax-deductible debt, or “good debt”. This will ultimately quicken the time you have till you become debt-free.

A cheaper way to pay off your bad debts is to consolidate them. For example, if you have a home loan and a credit card loan, merge the credit card loan with the home loan. Credit card loans often carry very high interest rates, which means you pay more. Although consolidating will extend the duration of your home loan, you should end up paying less interest overall.

A downside of consolidating your loans is that you could turn a short-term debt into a long-term debt. You could be paying interest for a much longer period of time and end up paying more than you would have before consolidating your debts. So only consolidate if you’re prepared to crack down on your payments on your enlarged loan.

  • Learn to use cash, not credit

Instead of racking up debt on a credit card, switch to cash. Use a primary credit card and have it as a backup for emergencies or necessary household items, such as a washing machine or TV. Keep your card in a safe place and out of reach so you’re not tempted to shop on impulses.

If you can't pay the credit card debt off in three months, avoid increasing your card limit.

  • Don’t borrow money to get out of debt

If you find yourself borrowing money to pay off your debt, it’s safe to assume you can’t pay off your original debt, so how do you expect to pay off the money you’re borrowing to pay off the money you borrowed? This is not a good way to get out of debt. Instead of borrowing money, you might need to reduce your cost of living, work more hours or ask for a raise so you can get yourself out of debt. If you need to borrow money, friends or family members are a better choice than the bank since the interest rates would be low or non-existent.

  • Look at your lifestyle

Evaluate your living situation. Work out what you spend your money on and ask yourself if that’s where your money should be going. Unnecessary spending habits will incur debt and you could be using that money to pay off your home loan or other debts. Look at ways to become a savvy shopper. You can find heaps of bargains online and in magazines that will allow you to put more money towards your debt.

Try to look for other ways to make extra cash. Consider getting a part-time job or raising money from a garage sale. Think outside the box and you’ll find some interesting ways to bring in extra cash.

  • Budgeting is king

If you’re trying to get a handle on your debt, one of the best tips is to form a realistic budget. Review your monthly expenses and make sure your income comfortably covers the bills and necessities. Only allow any money remaining after the bills are paid to be spent elsewhere. Stick to your budget.


Find out the core elements that make up a good budget and be sure to stick to it. It won’t be long before you’ll be in control of your debt.

Shirley Liu

Shirley is finder.com.au's publisher for banking and investments. She is currently studying a Masters in Commerce (Finance) and is the author of hundreds of articles. She is passionate about helping Aussies make an informed decision, save money and find the best deal for their needs.

Was this content helpful to you? No  Yes

Related Posts

More great ideas from finder.com.au

Get a life insurance quote
Get a life insurance quote

Find out what it costs to protect yourself and your family

More info...
Refinancing home loans
Refinancing home loans

Choose from offers with rates as low as 3.39% p.a.

More info...
Google Pixel
Google Pixel

Compare plans for Google's flagship Android phone

More info...
Christmas ideas
Christmas ideas

Visit our Christmas homepage for gift ideas, markets, travel & deals

More info...

Savings Account Offers

Learn about our information service
ME Online Savings Account

Maximum Variable Rate

3.05%

Standard Variable Rate

1.30
ING DIRECT Savings Maximiser

Maximum Variable Rate

2.75%

Standard Variable Rate

1.60
Citibank Online Saver

Maximum Variable Rate

3.00%

Standard Variable Rate

1.70
Bankwest Hero Saver

Maximum Variable Rate

2.65%

Standard Variable Rate

0.01

Ask a Question

You are about to post a question on finder.com.au

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At finder.com.au we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the finder.com.au privacy policy, receive follow up emails related to finder.com.au and to create a user account where further replies to your questions will be sent.

Ask a question
feedback