You get out of debt by doing three things at once. You stop adding to it, you free up money every month, and you send that money at one debt at a time until it is gone. Then you roll the payment into the next one.
Everything else is a tool for making that go faster. A lower interest rate means more of each payment hits the balance. More income means a bigger payment. A small cash cushion means a flat tire does not go back on a card.
Below are 13 realistic ways to do it, in the order that makes sense for most people. Start with the first five. The rest depend on how much you owe and what kind of debt it is.
Which Payoff Method Fits You?
There is no single best method. The right one depends on your rates, your credit and whether you can still cover your minimum payments.
| Method | What it is | Who it fits | Watch out for |
|---|---|---|---|
| Debt snowball | Pay minimums on everything. Put all extra money on the smallest balance first | You need quick wins to stay motivated | Costs a little more interest than the avalanche |
| Debt avalanche | Pay minimums on everything. Put all extra money on the highest rate first | You want to pay the least interest and can wait for the first win | The first payoff can take a long time |
| Balance transfer card | Move card balances to a new card with a low intro rate | Good credit, and a balance you can clear before the intro rate ends | Transfer fee, and the rate jumps when the intro period is over |
| Consolidation loan | One fixed-rate loan pays off several debts | Fair to good credit and a loan rate below your card rates | Running the cards back up afterward |
| Hardship plan | Your lender lowers the rate or payment for a while | A job loss, illness or other temporary setback | The card is usually frozen or closed while you are on it |
| Debt management plan | A nonprofit credit counselor sets up one monthly payment at reduced rates | You can afford payments but high rates keep you stuck | Takes years, and you stop using the cards on the plan |
| Bankruptcy | A court wipes out or restructures what you owe | You cannot realistically repay, even with lower rates | Stays on your credit report for up to 10 years |
If you are still current on every bill, start with the snowball or avalanche and a call to your card issuers. If you are already missing payments, skip ahead to credit counseling in step 9.
Start Here: Get Control of the Numbers
1. List Every Debt You Owe
Write down every debt with four things next to it: the balance, the interest rate, the minimum payment and the due date. Credit cards, car loan, student loans, medical bills, buy now pay later plans, money owed to family. All of it.
Your statements have the numbers. To catch accounts you forgot, pull your free credit reports at AnnualCreditReport.com. If the three reports do not match, here is which credit report is most accurate and why they differ.
This is the hardest step for most people, because the total is scary. It is also the step that makes every other one possible. A net worth tracker can keep the list updated for you once it is built.
2. Build a Bare-Bones Budget
Now find out how much you can put toward debt each month. Add up your take-home pay. Subtract the things you must pay: housing, utilities, food, transportation, insurance and every minimum payment. What is left is your starting debt payment.
If what is left is close to zero, cut before you do anything else. Go after the large bills first, since one phone call can save more than a month of skipped coffees. We walk through it in how to cut your expenses, how to lower your bills and our list of ways to live cheap. On a tight paycheck, start with how to budget on a very low income. If your pay changes month to month, see how to budget when your income varies.
A spreadsheet is enough. If you would rather have an app pull in your accounts and sort the spending, Empower has free budgeting and net worth tools, and we compare more in our guide to the best budgeting apps.
- Track your net worth in real-time and see all your accounts in one place
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3. Stop Adding New Debt
You cannot empty a bathtub with the tap running. While you are paying cards down, stop charging on them. Take them out of your wallet, delete them from your phone and from the stores where they are saved.
You do not have to close the accounts, and closing them can hurt your credit score. Some people still find it easier to remove the temptation. We cover both sides in cutting up your credit cards.
4. Save a Small Emergency Buffer
This feels backward when you are paying high interest. Do it anyway. Without any cash set aside, the next car repair or vet bill goes on a card and wipes out a month of progress.
You do not need a full emergency fund yet. Aim for a small starter amount, enough to cover a typical surprise bill, then go back to attacking debt. Our guides on how to start an emergency fund and how to save your first $1,000 show how to get there fast. Keep it in a separate account so you do not spend it. We compare the best online savings accounts.
Pick a Payoff Plan and Lower Your Rates
5. Choose the Snowball or the Avalanche
Both methods work the same way. You pay the minimum on every debt, then put every extra dollar on one target debt. When that debt is gone, its whole payment moves to the next target. The only difference is which debt goes first.
Here is an example. The rates are made up to keep the math easy. Say you have three debts and $525 a month for all of them. The minimums add up to $325, so you have $200 extra.
| Debt | Balance | Rate | Minimum | Interest this month |
|---|---|---|---|---|
| Store card | $800 | 18% | $25 | $12 |
| Credit card | $4,000 | 27% | $100 | $90 |
| Car loan | $6,000 | 7% | $200 | $35 |
Interest for one month is the balance times the rate, divided by 12. On the credit card that is $4,000 x 0.27 / 12 = $90. So a $100 minimum payment knocks only $10 off the balance. That is why minimum payments alone feel like running in place. In this example, paying only the minimums would take 104 months and cost about $7,260 in interest.
Snowball: the extra $200 goes to the $800 store card, so it gets $225 a month and is gone in month 4. That $225 then moves to the credit card, which now gets $325 a month. Avalanche: the extra $200 goes to the 27% credit card from day one, so it gets $300 a month. The first payoff does not come until month 17.
Run both plans to the end and each one clears all three debts in 24 months. The snowball costs about $1,614 in interest. The avalanche costs about $1,520. So the avalanche saves about $94, and the snowball gives you a win 13 months sooner.
Pick the one you will stick with. If your rates are far apart or your balances are large, the avalanche saves more. If you have quit plans before, take the quick win. More detail is in our guide on how to manage debt.
6. Call Your Creditors and Ask for a Lower Rate
This costs nothing and takes ten minutes per card. Call the number on the back, say you are working on paying the balance off, and ask for a lower interest rate. If you have paid on time, say so.
If you are struggling to make the payments at all, ask for the hardship program instead. Many issuers have one. It can mean a lower rate, a smaller payment or waived fees for a set period. The Federal Trade Commission's advice is to call before a debt collector gets involved, not after.
Ask what happens to the account while you are on the plan, and get the terms in writing before you agree.
7. Use a Balance Transfer Card the Right Way
A balance transfer moves debt from a high-rate card to a new card with a low or 0% intro rate. For those months, your whole payment goes to the balance. In the Federal Reserve's latest consumer credit report, card accounts that were charged interest paid an average rate of 22.15%, so pausing it is worth a lot.
It works when you can pay off most of the balance before the intro period ends. Divide the balance by the number of intro months. If you cannot make that payment, a transfer only delays the problem.
It backfires three ways. Most cards charge a transfer fee, a percentage of the amount you move. The rate jumps when the intro period ends. And a paid-off old card is an invitation to spend again. You also usually need good credit to qualify.
Discover it is one card that has offered an intro rate on balance transfers. Check the current intro period and transfer fee on the application page before you apply. We list more options in our guide to the best credit cards.
Annual Fee: $0
Regular APR: 11.99%-22.99% Variable APR
Intro APR: 0% intro APR for 15 months on purchases and balance transfers
8. Consolidate With a Personal Loan
A debt consolidation loan pays off your cards with one fixed-rate loan. You get one payment, a set payoff date and, if your credit is decent, a lower rate. In the same Federal Reserve report, the average rate on a 24-month personal loan from a commercial bank was 11.86%, about ten points below the average card rate.
Only do it if the loan's rate is lower than what you pay now, after any origination fee. And be honest with yourself about the cards. Consolidation fails when people pay off the cards with the loan and then run the cards back up. Then they have both.
Compare lenders in our guide to the best personal loans. Checking your rate usually does not affect your credit score.
Homeowners can also pay off debt with a cash-out refinance or home equity loan, and the rate is often lower still. Be careful. This turns card debt into debt secured by your house. If you miss those payments, you can lose your home. If you go this way, compare several mortgage lenders first.
9. Talk to a Nonprofit Credit Counselor
If you can afford some payment but the interest keeps you stuck, a nonprofit credit counseling agency is the next call. A counselor reviews your budget and debts with you. The first session is usually free.
If it fits, they can set up a debt management plan. You make one payment a month to the agency, and it pays your creditors. Your creditors may agree to lower your rates or waive fees. You still repay the full balance, so your credit takes far less damage than it would from settling. The FTC says these plans can take 48 months or more, and you generally stop using the cards on the plan.
Look for a nonprofit agency that offers budget counseling and free educational materials. Walk away from anyone who promises to fix everything or wants a large fee before doing any work. The Department of Justice keeps a list of approved credit counseling agencies by state.
Speed It Up
10. Bring In More Money
Cutting has a floor. Earning does not. In the example above, $200 extra a month cut the payoff from 104 months to 24. Every extra dollar you earn can go straight to the target debt.
Start with what pays fastest. Sell things you no longer use, such as electronics, furniture, tools and bikes. Ask for overtime or a raise. Then add something on the side. We have ideas in how to make money without a job and how to make money from your phone, and quicker ones in how to make $1,000 fast.
Treat windfalls the same way. A tax refund or bonus sent to your target debt can take months off the plan.
11. Use the Federal Options on Student Loans
Federal student loans come with tools that cards and private loans do not have. If the payment is too high, you can ask your loan servicer about a plan that bases your payment on your income. Compare them in our guide to student loan repayment plans.
Be careful with refinancing. Moving federal loans to a private lender can lower your rate, but you give up the federal payment plans and forgiveness programs for good. Read should I refinance my student loans first. Once the payment is under control, see how to pay off student loans faster.
Know What to Avoid and When to Get Help
12. Stay Away From Payday Loans and Be Careful With Debt Settlement
Payday loans. The Consumer Financial Protection Bureau says a typical two-week payday loan charges $15 for every $100 borrowed, which works out to an annual rate of almost 400%. Borrow $500 and you owe $575 in two weeks. Most people who cannot spare $500 today cannot spare $575 in two weeks, so the loan gets rolled over and the fees repeat.
If you are short before payday, a cash advance app costs far less. EarnIn lets you draw on pay you have already earned and repay it from your next paycheck. Use it as a stopgap, not a habit. More options are in our list of ways to get cash when you need money now.
- Access to your hard-earned cash right when you need it
- No hidden fees, no penalties, no waiting
- Get up to $1,000 of your paycheck per pay period
Debt settlement. A settlement company tries to get your creditors to accept less than you owe. Know how it works before you sign up. You usually stop paying your creditors and save into a separate account while the company negotiates. During that time, late fees and interest keep adding up, your credit score drops, and collectors may still call or sue. Creditors do not have to agree to anything.
Two more things. By federal rule, a settlement company cannot collect its fee until it has settled a debt and you have made a payment on that settlement. Anyone who asks for money up front is breaking that rule. And the IRS generally treats forgiven debt as taxable income, so a settlement can come with a tax bill unless you were insolvent at the time.
Settlement can still make sense if you are already far behind, cannot afford a debt management plan and want to avoid bankruptcy. Talk to a nonprofit credit counselor first. If you then decide to look at a settlement company, National Debt Relief is one of the larger ones. Ask for the total cost and the expected timeline in writing.
13. Know When Bankruptcy Is Worth a Consult
Bankruptcy is a legal tool, and for some people it is the right one. It is worth a consult if you cannot cover minimum payments even on a bare-bones budget, if a debt management plan would still take more than five years, or if you are being sued or garnished.
Chapter 7 wipes out most unsecured debt, and you may have to give up assets that are not protected by an exemption. Chapter 13 lets you keep your property and repay part of what you owe over three to five years. Some debts usually survive either one, including most student loans, recent taxes and child support.
The cost is your credit. A bankruptcy can stay on your credit report for up to 10 years. You must also complete credit counseling from an approved agency in the six months before you file. Many bankruptcy attorneys offer a free first consult, so finding out where you stand costs nothing.
Frequently Asked Questions
Start with what costs nothing. List every debt, cut your largest bills, and call each creditor to ask for a lower rate or a hardship plan. If you still cannot cover the minimums, a nonprofit credit counselor can review your options, usually with a free first session.
Paying the highest interest rate first costs the least. Paying the smallest balance first gives you a faster win. Either works as long as you pay the minimum on everything else and keep rolling each finished payment into the next debt.
Do a little of both. Save a small starter emergency buffer first so a surprise bill does not go back on a card. Then put your extra money toward debt, starting with high-interest credit cards.
Applying for a loan or card causes a small, temporary dip. After that, on-time payments and lower card balances usually help. The bigger risk is running the paid-off cards back up.
On a debt management plan, a nonprofit credit counselor arranges lower rates and you repay the full balance. With debt settlement, a company negotiates to pay less than you owe, usually after you stop paying, which damages your credit and can leave you with a tax bill on the forgiven amount.
The Bottom Line
Getting out of debt is simple to describe and slow to do. Know what you owe. Free up money. Stop the new charges. Then pay one debt at a time and lower your rates wherever someone will let you.
Do the first step today. List every debt with its balance, rate and minimum. Tomorrow, make one phone call to ask for a lower rate. When the last balance hits zero, keep making the same payment to yourself and build a real emergency fund. The best money saving apps can help you keep the habit.
