At a Glance

Debt-free, way to be. Becoming debt-free is your North Star. You’re relentlessly working toward that goal because you know the sooner you get out of debt, the sooner you can enjoy life without having to worry as much about your finances.

A debt-free lifestyle means having the ability to treat yourself to things you want and build up your savings. But, to get there, you’ll have to focus on repaying your debts, usually one by one—or all at once if you opt for a consolidation loan (more on that later).

Here are some ways to become debt-free on a low income that we’ll cover in this article:

Best ways to become debt-free on a low income

First things first: Figure out how much you owe. Once you know the total amount of debt you have, you’ll be able to research repayment strategies that fit your situation. After you’ve listed out your debt details, you can crunch the numbers—it could be a good idea to plug them into a debt payoff calculator so you can estimate when you’ll be debt-free and learn how much you can save on interest.

Here are some popular ways to become debt-free that you should consider:

1. Debt snowball

With the debt snowball method, you pay the minimums on all your debts but put extra money toward the one with the lowest balance until it’s fully paid off. Then you do the same with the next smallest balance, and so on. Snowballing your debt can be a good option if you need quick wins and motivation to keep going.

2. Debt avalanche

The debt avalanche method has you pay the minimums on all your debts—like the snowball method—but put extra money toward the debt with the highest interest rate until it’s fully paid off. Then you move on to the next highest interest rate, and so on. The debt avalanche payoff strategy can help you save money on interest in the long run, because you’re knocking out that high-interest debt first.

3. Snowball/avalanche hybrid

You may also choose to treat high-interest and low-interest debt differently and create a hybrid method of the two. Maybe you get that quick win by prioritizing your smallest balance, but now you want to save on interest so you prioritize the highest-interest debt next. As long as you stick with your payoff plan, do you.

4. Debt consolidation loan

The debt snowball and avalanche methods rely on you finding extra money every month, whether it be through earning additional income or savvy budgeting (or hitting the jackpot, I guess). But if you have low income and want to start paying down your debt, consider getting a debt consolidation loan. With debt consolidation, you can combine all your debt payments into one loan obligation, simplifying your monthly payments and usually lowering your interest rate. A good debt consolidation loan can help you get out of debt faster and save you money on interest payments.

5. Balance transfer credit card

Depending on your credit score, another option could be to get a balance transfer credit card. With a balance transfer, you can essentially transfer your debt onto a newly opened credit card, which you would then pay back over time. You should only consider a balance transfer if you’re able to secure a card with a 0% APR introductory offer—meaning you wouldn’t owe interest for a set number of months after you open the card—and if you’re able to pay off your full balance before that intro offer expires.

What debt do you want to consolidate?

Select all that apply

Others does not include mortgage

Tips for being debt-free that you should consider

Now that we’ve talked about the actual ways to pay off your debt, we can get to the tips that will help you do so on a low income. Spoiler alert: As foreshadowed, you’re going to need to either bring in more money, rework your budget, or lower your interest rates to start putting a dent in your debt.

Spend less every month

One way to become debt-free on a low income is to create more available funds in your monthly budget. How do you do that? Simple: trim the fat.

If you’re living above your means, you’ll probably have a lot of work to do to stop overspending. But in most cases, you can cut unnecessary expenses to give you more money to put toward your debt repayment.

Here are some ideas:

  • Cook your own dinner. Stop ordering in or eating out—that stuff adds up. Eat at home whenever possible. Every dollar you save counts.
  • Don’t shop for groceries when you’re hungry. I’ve made this mistake many times and always end up coming home with a bunch of snacks I don’t need. When you grocery shop, try to buy only what you need and what you’ll actually use. Creating a list and sticking to it really helps.
  • Clip coupons. You might not literally need to clip anything, but becoming a member of store loyalty programs is a good way to save here and there on everyday essentials from grocery stores, pharmacies, and more.
  • Cut the cord! If you’re paying a ridiculous amount for cable, think about this: How many of those channels do you watch? Consider cheaper streaming alternatives. You never know how much you can save.
  • Examine your subscription services. That said, it’s a good idea to audit all your subscriptions every few months to see what you use regularly. Chances are, you can cut at least one subscription from that monthly bill.
  • Re-evaluate your gym membership. Speaking of subscriptions, how many times per month do you go to the gym? Are there more affordable options in your area?
  • Goodbye, Starbucks. Or Dunkin. Or wherever. Stop spending so much on your daily coffee when you can brew at home and start saving money to address your debt.
  • Stop using your credit cards. Don’t close the accounts, but lock the cards up until you’re out of the hole. Cash is your new best friend—and since you can physically see it leave your hand when you make a purchase, you’ll probably spend less if it’s your only form of payment.

Make more money

Please don’t boo me or toss tomatoes in my direction. Everyone would like to make more money, and I understand it’s easier said than done. But if you’ve done all you can to eliminate unnecessary spending and you’re still struggling to pay off debt on a low income, logic leads us to one obvious solution: You need to raise your income.

Here are some ways to increase your monthly income so you have more money to put toward debt:

  • Pick up extra shifts. If you work an hourly job and/or are eligible for overtime, try to pick up more shifts when your schedule allows it.
  • Get an additional part-time job. If the problem is that you have the time and just can’t get extra shifts, consider picking up another part-time job to fill in those empty hours.
  • Side hustle FTW. If you’re already working a full-time job and have some non-work-related skills that lend themselves to a side gig, go for it. Freelancing as a writer, designer, developer, etc. can be very lucrative if you have the time and patience. It can also be as simple as driving for Uber/Lyft, walking dogs, or taking online surveys.
  • Sell stuff online. Got a lot of old items that might be valuable? Get them appraised and start selling on eBay or Facebook Marketplace. There are tons of other sites, too—just imagine making money on junk you were probably just going to throw away.

Think outside the box

Our last tip for how to become debt-free on a low income is to get creative. If you’ve exhausted your budget optimizing skills and done all you could to make more money, there are other options to consider.

Maybe you could use your charm to negotiate a lower interest rate with your creditors. You can also work with a company that will negotiate with lenders on your behalf. There are nonprofit credit counseling agencies that will help you through workshops and credit education. Just beware that if you settle any amount of your debt—say, through a debt management plan or debt relief program—it will show up on your credit report as settled and could hurt your credit score.

Budget well, find ways to make more money, and stay focused on paying off that debt.

Bottom line

Nobody said paying off debt was going to be easy. But think of the light at the end of the tunnel: your debt-free lifestyle, all shiny and rife with possibilities. Also keep in mind that there are many options to pay off your debt, even if you have a low income. Choose one that fits your personal situation and is realistic for you to stick to.

Ultimately, the steps to becoming debt-free include:

  1. Determine how much you owe, listing out details such as minimum monthly payments, due dates, interest rates, and debt totals.
  2. Research debt repayment options, such as debt snowball, debt avalanche, debt consolidation loan, or balance transfer credit card, and choose one that works for you.
  3. Set and stick to a monthly budget and avoid taking on additional debt.
  4. Generate additional monthly income, and put those extra funds toward paying off debt.
  5. Negotiate with your creditors, if possible, to learn if there is assistance or other options available to you.
  6. Talk with a nonprofit credit counseling agency who can help negotiate with lenders on your behalf.

Remember, even if your debt payoff journey is one or two years—or more—it’s important to never lose sight of that North Star.