At a Glance

In 2018, American household debt reached a record $13.21 trillion.¹ Americans under the age of 35 owe about $67,400 on average², with credit cards and student loans making up more than 40% of their debt.³ Here are several ways to get out of debt more quickly and help avoid getting into debt in the future.

In this article, you’ll find:

Tips to get out of debt fast

When you’re in debt, getting out can seem overwhelming. Depending on how much you have, it may even seem impossible. The good news is there are steps you can take to get out of debt quickly.

Steps to getting out of debt:

  • Figure out how much debt you owe
  • Know the details of your debt
  • Pick a repayment plan
  • Pay more than the minimum
  • Lower your interest rates
  • Settle or negotiate
  • Increase your income
  • Create and stick to a budget
  • Take advantage of “found money”
  • Create an emergency fund

1. Determine how much debt you owe

To start getting out of debt, it’s important to get a sense of where you stand by figuring out the total amount of debt you owe. Compile your most recent bill statements for all credit cards and loans, credit reports, and credit scores. Your credit reports will allow you to check for accuracy among all recorded debts. Your credit score will let you determine if you’re eligible for a debt consolidation loan or lower interest rates. There are several free apps that let you link many accounts to view your debt more easily, but you can also compile the information in a spreadsheet.

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2. Managing debt: Know the details

Once you have an idea of how much you actually owe, take a closer look at the details. There are three things you’ll want to know for each debt:

  • Due date for each payment
  • Minimum monthly payment
  • Interest rate

Knowing these key details will help to determine the best repayment plan for you.

3. Develop a debt repayment plan

There are two primary strategies for paying off debt the snowball method and the avalanche method. Deciding which is right for you is up to personal preference. Our loan payoff calculator can help you make that choice. You can build different payment scenarios with the tool and easily compare the savings from each plan.

Snowball method

The snowball method of debt repayment prioritizes paying off the smallest balance first. Once that has been eliminated, you’ll work toward your next smallest balance, i.e., snowballing. The concept is to make minimum payments on all debts, except the smallest balance, which you’ll pay as much as possible. Then repeat this process until all your debt is paid off.

The snowball method likely won’t save you as much money on interest fees, but it can have a positive psychological effect as you’ll see small victories sooner. The idea is with predictable payments and a certain end date, you’ll be motivated to pay off debt faster and get out of debt completely.

Debt Snowball Calculator

The debt snowball calculator is a simple way to create a roadmap for financial freedom and getting out of debt. Enter your details and learn when you’ll be debt-free, how much you’ll save on interest, which debt to repay first, and how to pay off the rest.

Avalanche method

The avalanche method of debt repayment instead focuses on paying off the debt with the highest interest rate first. Like the snowball method, the concept is to pay the minimum on all debts, while throwing as much money as you can at the debt with the highest interest rate. Once that debt is paid, move on to the next highest interest rate and continue the cycle until all your debts are paid.

4. Pay more than the minimum on your credit card balance

Don’t fall into the trap of paying the minimum on your credit card balances. Every American household with a credit card has, on average, $8,398 worth of credit card debt.4 The national average APR, or annual percentage rate, on all credit cards is 17.35%.5

With those figures as an example, if you paid the minimum $335.92, or 4% of the balance, per month, it would take more than 12 years to pay off the debt. Not to mention you’d be paying more than $4,500 in interest.

And that’s all assuming the debt is on one card, while the average credit card holder has at least four cards. Paying more than the monthly minimum will help you save on interest rates and help you pay off your debt sooner.

5. Lower your interest rates

Getting your interest rates down can be one of the fastest ways to help end debt. The more you owe, the higher your interest rate is, and thus the more you owe. One way to curb this vicious cycle is by lowering your interest rates. Here are several ways to do that:

Get a credit card with a lower interest rate

Depending on your credit rating, you may be eligible for a credit card with a better interest rate than your current card. This could even include a card with a 0% introductory interest rate.

Get a balance transfer card with a low or 0% introductory interest rate

Another possibility is to get a balance transfer credit card with a lower interest rate or a 0% introductory APR. A balance transfer allows you to move debt from one credit card to another. You’ll still have the same amount of debt, but if you’re able to get a 0% introductory rate, your debt won’t increase as you work to pay it off.

Consolidate debt with a personal loan

For those with a lot of debt at a high interest rate, one way to get out of debt is with debt consolidation through a personal loan. Personal loans tend to have lower interest rates than credit cards. With a personal loan, it can be easier to track exactly how much you owe each month and how long it will take to pay off. Personal loans come with fixed interest rates, monthly payments and repayment periods.

Compare: Personal Loans for Debt Consolidation

Consolidate student loan debt

If student loans are your biggest contributor to debt, there are resources that can help. Consider student loan consolidation or an income-based repayment plan. There also are certain situations that allow you to have your federal student loans forgiven, canceled, or discharged.

6. Settle for less than you owe/negotiate other bills

Calling creditors to negotiate a settlement can often help you get your debts down to much less than what you actually owe. While you can do this on your own, there also are debt settlement companies that can assist you for a fee. The Federal Trade Commission offers detailed advice on settling credit card debt. But, the FTC warns of certain risks and debt settlement scams. It’s also possible to negotiate down other expenses like cable/internet, medical bills, car insurance rates and monthly rent.

7. Earn more money

Ramping up your earnings can be difficult. Some ways to do so can include picking up extra shifts or hours at work, asking for a raise or even adding a side hustle. In 2017, 44% of Americans between the ages of 25 and 34 reported having a side gig.6 Make sure that whatever extra money you’re earning—however you’re doing it—you’re putting toward paying off your debt.

8. Create and live within a budget

Creating a monthly budget and prioritizing your payment plan are key to paying off your debt. This will help you track where your money is going and figure out where you can cut back. A simple spreadsheet can be a good starting point for constructing your budget. The Federal Trade Commission also offers a downloadable budget template. The FTC breaks expenses into the following categories: housing, food, transportation, health, personal and family, finance and other. If you’re spending more than you’re making, you want to cut costs. Check your habits and drop expensive ones when possible.

9. Use “found money” to pay off balances

Many people will come across “found money” of some sort throughout the course of the fiscal year. Found money can come in the form of an annual raise, a bonus or an inheritance. Another form of found money could be a big tax return. Wherever your found money may come from, you can use it to pay off chunks of your debt.

10. Create an emergency fund to avoid future debt

Saving money while trying to pay off debt may seem like an impossible task. But building savings is important to avoid slipping back into old patterns. A job loss, major medical bill or car repair can throw you for a loop. If you have an emergency fund to tap into, that can help you stay on track. Most experts suggest having an emergency fund that can cover three to six months’ worth of expenses. As you start to cut debts, you can reallocate some of that money into a savings account for emergencies.

Loans to get out of debt

Consolidating your debt with a loan may be a good idea when:

  • You have a good credit score and a strong DTI
  • You can lower your interest rates
  • You can afford to make your new payments each month

On the other hand, if you have poor credit, have a small debt balance you can pay off within one year, or can’t afford the monthly payments, debt consolidation may not be the best option for you.

There are several advantages to consolidating your debt with a loan, including fixed and lower interest rates and simplified monthly payments, which can help save you money and pay off your debt faster. There are two primary types of loans you can use to get out of debt.

A personal loan

For those with a lot of debt at a high interest rate, one way to get out of debt is with debt consolidation through a personal loan. Personal loans tend to have lower interest rates than credit cards. With a personal loan, it can be easier to track exactly how much you owe each month and how long it will take to pay off. Personal loans come with fixed interest rates, monthly payments, and repayment periods.

Compare: Best Personal Loans

A home equity loan

A home equity loan can offer low interest rates, lower monthly payments, and tax-deductible interest. You also don’t need excellent credit to qualify. However, this type of loan is essentially a second mortgage on your house, so if you don’t make the payments you could lose your home, your home’s value could decrease, or you may face extra fees.

Related: Home equity loan for debt consolidation

How to get out of debt on a low income

Even if you’re broke or have no money, you can still take steps to get out of debt and work toward your financial goals. A few tips include:

  • Avoid more debt. Borrowing money to pay off other debts, or taking on debts for unnecessary purchases or spending, can be detrimental to reaching your financial goals. In general, avoid taking on any new debt until you’ve paid off what you already have.
  • Budget. Creating and sticking to a budget, which we explain above, helps you see all of your incoming and outgoing cash. When you have a low income, planning for and keeping track of everything you spend can be key to making your income last.
  • Use the snowball method. When your income is limited, the debt snowball method may be a better option. This helps you celebrate the small milestones along the way, decreasing your total number of creditors and allowing room for the celebration of small successes.
  • Earn extra. Starting that side hustle, selling belongings you no longer use, picking up extra hours at work, or getting a second part-time job are all ways you can earn more and, thus, have more to put toward your debts.
  • Explore all your options. Debt consolidation and debt relief options may be a good fit if you have a low income. Debt relief is when your debt is forgiven or canceled, either partially or in full. There are a few methods, including credit counseling, debt settlement, debt management, and bankruptcy. It is important to be aware of scammers; make sure you’re working with certified professionals who you can trust.

How to get out of debt with bad credit

If you have poor credit, you may be disqualified from some debt relief programs such as low-interest debt consolidation or balance transfer credit cards. The good news is there are other options available even if you have poor credit.

  • Talk to your bank. If you’ve had a checking and/or savings account with your bank for a long time, they may be willing to give you a personal loan. Not only will this help you pay off your debt, but it will also help the bank because it keeps you a customer for longer.
  • Join a credit union. Credit unions sometimes offer better loan standards, interest rates, and fees for their members. If you have bad credit, you may still qualify for an interest rate that’s lower than your debt because of your membership.
  • Consider debt management programs. A debt management program can help reduce your interest rate and lower your monthly payments, but also offers credit counseling that will help you in the long run. These repayment plans are set up and managed by a credit counseling agency, which also offers financial and educational assistance to help people manage their finances better.
  • Research debt settlement. Also called “debt relief,” this is the process of getting rid of your delinquent debt for less than the amount you owe. You typically offer a lump-sum payment to a creditor in exchange for forgiving a portion of your debt.
  • Apply for a home equity loan. The good thing about a home equity loan is your credit score isn’t taken into consideration, but you’re also risking losing your house if you aren’t able to make payments on the loan. Be sure to weigh the pros and cons of this option.

Ask about a debt consolidation loan. While unsecured consolidation loans usually require higher credit scores, secured loans don’t usually have that requirement

How to get out of paying debt collectors

When you’re being called or contacted by debt collectors, it’s easy to feel totally out of control. You may also feel scared, intimidated, or overwhelmed.

Unfortunately, you can’t completely avoid paying debt collectors. If the company and your debt are legitimate, you should do your best to repay it.

However, it’s important to know how to handle debt collectors, including understanding your rights and what collectors can and cannot do, in order to manage your debt in the best way.

  • Don’t pay right away. If you’re contacted by a debt collector, don’t make any payments or provide any payment information when they first contact you. Instead, take time to think about your options and do your research. Acknowledging the debt before you’re able to understand it can have significant negative effects.
  • Ask for information. First, request a validation letter from the debt collector. This will include details on the debt, the collection company, and how to dispute the debt. You should also gather your own records, including information on the creditor and the history of your payments.

Be sure to verify that not only is the debt yours but that it’s accurate. Make sure it’s not more than you believe you should owe. If you believe the balance isn’t correct or you’ve received it in error, you can file a dispute.

There are debt collection scams out there, so do your due diligence in researching the collector. Check with the Better Business Bureau, research them online, or check the licensing status of the business.

  • Record everything. Keep records of every communication with the debt collector, and any payments you make. Record phone conversations if you can, or include information such as the date, time, contact information for the person you talked with, and details about the conversation.

Negotiate. You may be able to negotiate a smaller payment with the debt collector. For example, offer to pay $3,700 toward a $5,000 debt and ask if they will forgive the rest. Sometimes, by making a lump sum payment upfront, the debt collector may lower your total payment. Or, you can ask about a monthly payment plan.