How to Get Out of Debt

Quick Answer

To get out of debt, start by creating a list of everything you owe. Then, look for ways to adjust your budget in order to free up funds to put toward your debts. Consider additional resources, such as credit counseling or debt consolidation.

A concerned man looking at his finances on the couch.

Carrying high-interest debt can be overwhelming, especially when money is tight. Large, interest-bearing balances can feel difficult to get ahead of. Fortunately, while the road to getting out of debt can be long, there are strategies and resources to bring paying off your debt into reach. Here are nine steps you can take to get out of debt.

How to Get Out of Debt Fast

Paying off your debt can help you improve your financial health, feel more financially secure and reach long-term money goals. Here are strategies and tips for getting out of debt faster.

Add Up All Your Debt

Before you decide on a strategy for paying off debt, take inventory of everything you owe. List all your debts, including those you want to pay off now, such as high-interest credit cards, and those you plan to continue to make minimum payments on, such as your student loans, auto loan or mortgage.
Here's how to start:

  1. Write down all your debts. Note any debts you owe, including credit card balances, personal loans, auto loans, student debt, your mortgage and more. If you aren't sure exactly what you owe, check your credit report for free to see your debt accounts, including any in collections. Keep in mind that since lenders only report account balances to the credit bureaus once a month, checking your balances online will give you the most up-to-date information.
  2. Record payment information. Next to each debt, write down the interest rate, minimum monthly payment and due date.
  3. Calculate your total minimum monthly payment. Add up the minimum payments of all your debts to find the bare minimum amount you need to pay every month to stay current on your debt. Try to make all your minimum payments on time, as late fees could add to your balance and slow your progress.

Learn more >> Late Credit Card Payment? Here's What to Do

It can be helpful to construct a table that contains all of your balances and their respective interest rates, minimum monthly payments and due dates. Here's an example.

Sample Debt Repayment Summary
Debt Type Total Balance Interest Rate Minimum Payment Monthly Due Date
Car loan $20,000 7% $500 The 1st
Credit card $1,500 23% $35 The 7th
Credit card $3,000 24.8% $35 The 10th
Personal loan $5,000 15% $200 The 14th

Adjust Your Budget

A budget can help you pinpoint places where you might be able to cut back. That puts you in a better position to pay down your debt more aggressively. Here's how to assess how much you can afford to pay each month, plus find extra money to put toward your debt:

  • Calculate your monthly expenses. Using a spreadsheet or a budgeting app, calculate how much you spend on basic expenses each month, such as groceries, your cellphone bill, utilities, gas, rent or mortgage payments and so on. For expenses that vary, such as your monthly electricity payment, take the average over several months.
  • Compare your expenses to your income. Add up your monthly net income—that's what you take home after taxes. Subtract your total expenses from your monthly income, including necessary expenses noted above and discretionary expenses, such as entertainment and other nonessential expenses. If the amount you have left over isn't enough to help pay down your debt, you'll need to take action to improve your cash flow, by cutting expenses or increasing your income.
  • Look for opportunities to save. Review all your expenses and consider ways to spend less. For example, consider cutting back on dining out and retail purchases or negotiating your utilities and other services.

Consider using a budgeting app to streamline your budgeting and track your expenses. Apps such as Goodbudget and You Need a Budget (YNAB) allow you to allocate funds directly toward paying off loans and credit card debt.

Learn more >> How to Pay Off More Debt Using a Budget

Use a Debt Repayment Strategy

A debt repayment strategy can help you decide which non-mortgage debts to prioritize first, get out of debt faster and save on interest. Here are two strategies to consider.

Debt Snowball Method

With the debt snowball method, you prioritize your debts in order of smallest balance to largest balance. You'll continue to make minimum payments on all your debts, but you'll apply any spare funds to your smallest balance. Once that's paid off, you'll take any extra money you were paying on that balance and pay it to the next-smallest balance, and so on until all your balances are paid.

The benefit of this method is that you'll pay off your smallest balances more quickly, which can be motivating and act as a springboard toward paying off more of your debts.

Debt Avalanche Method

The debt avalanche method has you pay off your debts in priority of highest to lowest interest rate. This method will save the most money on interest in the long run.

To use this method, make the minimum payments on all of your debts. Then, funnel any extra money you have toward paying off your highest-interest debt. Once your highest-interest debt is paid off, move on to the debt with the next highest rate and repeat the process until all debts are paid.

Learn more >> Avalanche vs. Snowball: Which Repayment Strategy Is Best?

Look for Additional Income

On top of cutting back spending to put more toward paying down debt, finding ways to increase your cash inflow can help you get out of debt faster. Here are some potential ways to supplement your income or find extra cash to direct toward paying off your debts:

You can also direct any extra funds that come your way, such as your tax refund or work bonus, toward making additional payments on your debt.

Learn more >> 7 Ways to Make Money Fast

Consider Credit Counseling

Talking to a nonprofit credit counselor can help you learn more about your options for repaying your debts. Many credit counselors offer their services on a sliding scale and typically provide a free initial consultation to review your options before you decide to proceed.

In some cases, your credit counselor may suggest a debt management plan, which is designed to help you manage repayment if you are deep in debt, particularly with credit cards. A credit counselor negotiates with your creditors to see if they'll accept reduced interest rates or monthly payments, or waive fees. You'll pay the credit counseling agency once per month, and the organization makes payments toward your creditors on your behalf.

Learn more >> How to Find a Good Credit Counselor

Consider Consolidating Your Debt

Debt consolidation can be a good strategy if you have good credit and are feeling overwhelmed by the number of debt payments you have to make each month. Debt consolidation typically works best for paying off credit cards and personal loans.

A word of caution: Don't use a personal loan to consolidate your credit card debt if you think you may be tempted to rack up new balances on your credit cards. If that happens, you could end up deeper in debt.

Use a Balance Transfer Card

If you qualify for a balance transfer credit card and can afford to pay off your debt in the next year or so, transferring your balances could be an option for saving interest while you pay off your debt.

Balance transfer credit cards offer an introductory 0% APR promotional period—typically a year or more. Once the introductory period ends, the interest will jump up to the card's standard rate and apply to any remaining balance. That's why balance transfers are best combined with a firm plan to pay off your debt before the 0% APR period ends.

Also, balance transfer cards generally require you to pay a balance transfer fee that's typically 3% or 5% of the total transfer amount. The fee for transferring a $5,000 balance could cost you $150 to $250, for instance, and is added to your transferred balance.

Apply for a Debt Consolidation Loan

If you have a good credit score, you may be able to use a debt consolidation loan to streamline your monthly debt repayments and lower your interest rate. Simplifying multiple payments into one fixed-interest loan can make paying off your debt easier to tackle.

Learn more >> Is a Debt Consolidation Loan Right for You?

Don't Forget About Debt in Collections

If you've fallen behind on paying a debt and now it's in collections, prioritize paying it off. Bringing collection accounts current can help reduce their negative impact on your credit, which is a good reason to put it at the top of your to-do list. Plus, reducing calls from debt collectors can help relieve some of your financial stress.

Stay Accountable

Getting out of debt is challenging. Small, achievable goals can help you stay motivated and on track. For example, you might aim to pay an extra $50 towards your debt per paycheck. You can also set milestone goals, such as paying off your debt with the smallest balance in three months. As you make progress toward paying off your debts, find ways to reward your progress and take pride in how far you've come.

Frequently Asked Questions

  • The average total debt per person reached $104,215 in 2023, according to Experian data, an increase of 2.3% from 2022. That figure includes various types of debt, including mortgages, credit cards, car loans and student debt. Notably, credit card debt (which tends to come with higher rates than installment loans) grew to an average balance of $6,501 per person.

    Average consumer debt balances vary across generations; for instance, average balances increased the most for Generation Z, reaching an average of $29,820. And average debt decreased the most for the Silent Generation, dropping to an average of $38,600 per person.

  • There isn't one single best way to get out of debt. The method that works best for you will depend on your personal financial situation. Ultimately, the best way to pay off debt is the way that you can stick with.

    That said, it's often most advantageous to choose the debt payoff strategy that saves you the most money. Putting extra money toward your highest-interest balances first could be the best move by the numbers alone. Be sure to check for any fees that could impact your overall costs, such as prepayment penalties.

  • Credit is a reflection of your history of borrowing and repaying what you owe, so the way you manage your debts can impact your credit positively or negatively.

    • Payment history: Making on-time payments on your debts each month has the single biggest positive impact on your credit. On the other hand, even one payment made 30 or more days late has a negative impact and remains on your credit report for seven years.
    • Amounts owed: Your total balances have an impact on your credit, and so does the ratio of your revolving balances compared with your available credit (known as your credit utilization ratio). In practice, keeping your credit card balances low can help you improve your score, whereas maxing out your cards hurts your credit.
    • Length of credit history: The age of your oldest account, the age of your newest account and the average age of all your credit accounts combined factor into your credit scores. This means that keeping old accounts open can help your score.
    • Credit mix: Responsibly managing a mix of both installment loans (such as student loans, personal loans and mortgages) and revolving credit (such as credit cards) is linked to higher scores.
    • New credit: Too many new credit applications can indicate risk to lenders. If you've recently taken out many new loans or opened new credit cards in a short span of time, the multiple hard inquiries on your report can drag down your score.

    Learn more >> What Affects Your Credit Scores?

  • It can be extremely stressful to find yourself in deep debt, especially when your financial situation becomes dire or you can't see a way out. Here are resources to consider when money is tight:

    • Check to see whether you're eligible for government assistance for low-income families. If you qualify, receiving aid in the form of the Supplemental Nutrition Assistance Program (SNAP) or emergency rent relief can help you make ends meet and allow you to direct funds toward getting your debt under control. Calling or texting the 211 Network can help you find available help near you.
    • Work with a credit counselor to go over your debts, review your finances and come up with an individualized plan for how to proceed.
    • A credit counselor may also recommend a debt management plan, in which you combine your debts and make one monthly payment. This can help you avoid default or bankruptcy if you're struggling to afford payments.
    • Debt settlement, in which you negotiate with your lenders to have your debts reduced, may be an option. That said, you should consider the risks of settlement first.
    • Bankruptcy is a last resort option with deep and lasting negative impacts on your credit. Depending on the type of bankruptcy you declare, you may either have all your debts discarded or be required to repay at least part of your debt. Federal law requires that you undergo credit counseling before you file for bankruptcy. During your session, your counselor will go over the pros and cons of bankruptcy and review other options.

    Learn more >> How to Get Out of Debt on a Low Income

  • Many experts recommend using the 50/30/20 budget for getting out of debt. This method has you earmark 50% of your net income for just essentials—that's things like housing, bills and basic groceries. Then, you allocate 30% toward discretionary spending and the remaining 20% toward savings and debt repayment.

    You could use this budget strategy as the base for your spending plan. You might find that tweaking the percentages to dial back on discretionary spending (or put less income toward essentials, if possible) is helpful for getting out of debt even faster. If this budget isn't right for you, there are several other types of budget to choose from.

    Learn more >> 5 Types of Budget Plans to Know About

The Bottom Line

Paying off high-interest debt is a big step toward improving your complete financial picture long term. When you reduce or eliminate what you owe, you free up funds that would have gone to making principal or interest payments. You can put that money toward achieving your other financial goals, such as saving for retirement or buying a home.

Beyond improving your cash flow and financial health, getting out of debt can also help you qualify for better credit offers down the line. For example, paying down debt could lower your debt-to-income ratio, which may also help you qualify for a lower-rate auto loan or mortgage. Sign up for free credit monitoring through Experian to watch how your debt management habits pay off over time.