How to Get Out of Debt

Paying off debt is an essential step toward financial stability — but tackling debt requires understanding your financial situation, creating a plan, and sticking to strategies that work for you. With the right approach, you can take control of your finances and move confidently toward a debt-free future. 

How to get out of debt fast 

Unless you win the Powerball or receive an unexpected windfall, paying off debt is a process that takes time and patience. A realistic plan, combined with focused strategies, can help you make faster progress. 

Consistency is key — even small, regular payments can make a big difference over time, helping you reduce debt faster and freeing up more of your income for future goals. 

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Understand your current debt 

Once you’ve decided to get out of debt, make a list of your outstanding debts and how much you owe in total. Remember to include any credit card balances, personal loans, car loans, and student loans. 

List the individual amounts you owe, their interest rates, and your monthly payments. Jotting down these extra details can help you decide which debts to tackle first. 

Check your credit 

Pulling your annual credit report helps identify any debts you may have forgotten about, including those in collections. It can also give you a general idea of your overall financial situation. 

If you’re concerned about your credit history or score, remember that your credit can improve over time as you pay down debt and make on-time payments. Eventually, your credit score will start to go up. 

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Establish a plan to get out of debt 

Once you understand the details of what you owe and how it impacts your financial health, you’re ready to build a plan. A well-structured debt payoff plan can empower you to take control of your finances, reduce stress, and make steady progress toward a debt-free future. 

Debt snowball method 

The debt snowball method involves paying off your debt with the smallest balance and then working your way up to the largest balance until all your debts are paid. This is where that list you made comes in handy, as you’ll need to organize the balances from the lowest to the highest. 

From here, you can designate as much money as you can each month toward the smallest debt, while making minimum payments on all other debts. Once you’ve paid off the first debt, continue the process down the list until you’re debt-free. 

Debt avalanche method 

With the debt avalanche method, you’ll focus on paying off the debt with the highest interest rate first while making minimum payments on all other debts. Then, you’ll pay off the debt with the next highest interest rate and keep going until you repay all your debts. This method can help you save more money on interest payments. 

Debt consolidation 

When figuring out how to get out of debt, opting for debt consolidation could be a good idea if you’re looking to lower your borrowing expenses and organize your payments. 

Debt consolidation combines all your debt into one, giving you a single monthly payment rather than multiple payments. 

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Find help to get out of debt 

It’s understandable that digging out of debt can get overwhelming. Sometimes you might need a little help getting started, and that’s okay! 

Credit counseling 

Talking to an expert like a credit counselor is the perfect step to take if you aren’t quite sure where to start in lowering your debt. These professionals will offer a fresh set of eyes that can walk you through your options and offer help with: 

• Budgeting 
• Money management 
• Credit analysis and breaking down what you owe 

Negotiate with lenders and debt collectors 

Contacting lenders and debt collectors can help you figure out your repayment plan. Negotiating with a lender can lead to modifications of your loans like changes in interest rates, loan forgiveness, and the length of the loan term. Lenders can also help you plan your repayment plan and figure out refinancing. 

If you talk and negotiate with debt collectors, they might settle on a smaller repayment amount or more manageable repayment plan. 

Debt settlement programs 

Once you look at all your debt, you may find that a debt settlement program, or debt relief, is the best option to try. This involves negotiating with creditors (like your bank or credit card company) to reduce the amount of debt that you need to pay back. 

Debt settlement programs often involve using a third party that negotiates on your behalf. With outside help, this should make the process slightly less stressful. 

What does filing for personal bankruptcy do? 

If you went through all your possible debt-settling options and your debt seems unmanageable, filing for bankruptcy might be your only option. While bankruptcy sounds daunting, it could provide you with a fresh financial start that’ll help you get back on track. 

Bankruptcy might allow you to: 

• Set up an affordable repayment plan 
• Liquidate your assets to pay off your debt 
• Have some or all your debt discharged 

Depending on your financial situation, you may need to pay some of your debt back before the remaining balance is wiped out. This means you’ll no longer have to pay the debt off, and debt collectors will stop contacting you. 

Tips on how to get out of debt fast 

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Pay the highest-interest debt first 

Interest can tack on quite a bit of money, which can make paying back your debt more difficult. Focusing on paying off debts with high interest rates could help you save money in the long run. You can then put that money toward other debts or in savings. 

Get a balance transfer credit card 

If you’re overwhelmed with credit card debt, consider a balance transfer card. This option involves transferring all your high-interest credit card balances to a new credit card with a low or 0% interest rate. With this strategy, the debt payoff process is more manageable because you’re saving money on added interest. 

Add to your income 

Naturally, the more money you have, the more you’ll be able to contribute toward your debt. 

If your current income isn’t enough, you may want to get a part-time job, pick up a side hustle, or sell unwanted or unused items online. Get creative and think about what products or services you can offer to add extra money to your bank account and pay off debt faster. 

Common side hustles include: 

• Remote bookkeeper or data entry clerk 
• Ridesharing 
• Food and grocery delivery 
• Pet sitting

You don’t necessarily need a second job. Even just an extra couple hundred dollars per month can make a world of difference when paying back debt. So, if your schedule allows for it, pick up something new to get closer to a debt-free life! 

Create a budget 

Have you looked at your current bills and spending habits lately? A budget can be helpful by creating a spending plan based on your income and expenses. 

If you create a budget (and stick to it), you’ll find it easier to save money. Consider the 50/30/20 budget in which you spend about 50% of your after-tax income on necessities, no more than 30% on wants, and at least 20% on savings. 

Cut back on non-essential spending 

Take a close look at where you spend money every month. Are you buying coffee every day when you can be making it at home? Chances are you’ll find that some of your spending is non-essential. Reduce or even eliminate non-essential expenses such as a gym membership you don’t use, restaurant meals, or daily trips to the coffee shop. 

Track your expenses 

Use a spreadsheet or piece of paper to track your expenses. You may want to track by categories like housing, utilities, gas, food, and entertainment. By keeping tabs on your expenses, you can stick to your budget, uncover spending issues, and ultimately meet your savings goals. 

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Set savings goals

Think about why you want to get out of debt. Maybe you’d like to move from an apartment to a house in the next few years, or you’re hoping to retire by the time you’re 60 or 65. 

Set your long-term savings goals, jot them down, and keep them in a place where you’ll always see them. This way you can stay motivated to continue saving your money. 

Start getting on track to your debt-free life 

Debt can be an overwhelming subject. But with the right tools, and sometimes a little help from some professionals, you’ll be on your way to a debt-free life soon. Start by assessing your debt, making a repayment plan, and seeing where you can increase your income or save some money.