If you’re wondering how to get out of debt, you’re certainly not alone. In the fourth quarter of 2023, total household debt stood at a staggering $17.5 trillion, with credit card balances at a high of $1.13 trillion, according to the Federal Reserve Bank of New York.
Though debt can pile up for various reasons, the result is the same. The monthly payments and interest can become a major burden, leading to stress and financial anxiety. Below, we’ll cover strategies for getting out of debt and what to consider on your debt repayment journey.
1. List out your debt details
Creating a plan to get out of debt requires focus and specificity. That means taking a hard look at all of your debt. For each outstanding balance, list out the…
- Type of debt (such as student loans and credit cards).
- Lender.
- Total balance.
- Interest rate.
- Monthly payment.
This list gives you an honest look at what you really owe. It can also come in handy later, when you figure out a debt repayment strategy.
“Too often we focus on just one debt that we see as the most urgent — in truth, perception is not always reality,” said Bobbi Rebell, a CFP, author and founder of the Financial Wellness Strategies website. “For example, with student loan payments coming back (from a pause in October 2023), that might seem like something to prioritize… But student loans often have manageable interest rates compared to other kinds of debt, like consumer debt. So it’s important to really sit down and go over each debt and the cost of carrying it, and then put a plan together.”
Tool tip: Try out a free debt payoff planner and tracker from Happy Giraffe, a nonprofit that focuses on budgeting education.
2. Adjust your budget
Getting out of debt requires making some changes and adjusting your budget.
“Debt doesn’t happen overnight, and doesn’t get fixed overnight — so [when] you make the decision that you want to pay off debt, you have to have that mindset,” said Amy Irvine, a CFP at New York-based Rooted Planning Group, a fee-only financial planning group. “Look at your current spending habits, what can you cut out, even if it’s temporary. This can create awareness and ensure you don’t continue to build additional debt.”
To start, write down your total monthly take-home income and list out your expenses:
- Mark certain expenses as “must-haves,” which are your needs — such as housing, insurance, food and transportation.
- Mark other expenses as “nice to have,” and those are your wants. These can include smaller, recurring costs like streaming subscriptions or larger one-offs like travel.
Are there expenses that you can eliminate from your budget, even for a short time? If not, is there a way to reduce the total costs? For example, instead of dining out twice a week, you cut down to once a week. Though it’s not pleasant to cut back if you’re used to a certain lifestyle, remember this is temporary, and focus on the goal of debt freedom.
Tool tip: To track your income and expenses, consider using a free budgeting tool like Mint.
3. Try the debt snowball or avalanche method
Figuring out how to get out of debt can be stressful, but having a repayment strategy can keep you focused. Enter the debt snowball and the debt avalanche repayment methods.
The debt snowball method essentially creates a snowball effect when you pay the minimum on all debts, while putting extra toward the smallest balances. You can start to see progress while paying off the lowest balances first, then move on to the next.
The debt avalanche method saves money on interest when you pay the minimum on all debts while putting extra funds toward the balance with the steepest interest rate. Once that costliest account is paid off, the extra funds move to the balance with the next highest rate until all debts are repaid.
| Debt snowball | Debt avalanche |
|---|---|
Pays minimum on all debts | Pays minimum on all debts |
Put extra funds toward smallest balance | Put extra funds toward highest interest rate debt |
May boost motivation | May boost interest savings |
“Paying off the highest interest rate debt (avalanche) will save the most money, but the plan that will be successful is the one you can stick to,” said Rebell, the author of “Launching Financial Grownups.”
If motivation keeps you focused, the debt snowball method may be for you.
“Although you typically will save more with the debt avalanche, in my experience, people stick with the debt snowball because they can ‘see’ progress,” said Irvine.
Tool tip: Use a calculator from Undebt.it to understand how the snowball and avalanche methods will affect your repayment.
4. Submit more than the minimum payment
If you want to learn how to get out of debt fast, it’s key to pay more than the minimum amount due each month. This way, you can start to tackle the interest and chip away at the principal balance.
By cutting back on expenses in your budget (step two, above), you can allocate those funds toward your debt. Additionally, commit to using any windfalls toward your debt repayment. Sudden cash infusions include:
- Tax refund
- Inheritance
- Refunds from overpayment
- Proceeds from selling items
Let’s review two examples of how paying more than the minimum can save you money (and grief).
Increase your payment amount
Let’s say you have $40,000 in student loans at 6.8% interest, on a 10-year repayment term. Your monthly payment would be $460 and, over time, you’d pay a total of $15,239 in interest.
If you add $50 to your payment per month, increasing it to $510, you would pay $13,039 in interest. That would net you $2,200 in savings over a decade.
Make a one-time, lump-sum payment
Let’s say you have $10,000 in credit card debt tagged with a 16% APR. Your minimum payment would be $233. By paying the minimum, you can expect to pay off the debt in 64 months, costing you $4,926 in interest.
With a single, lump-sum payment of $3,000 thanks to your tax refund, for example, you could trim those figures to 39 months and $1,999 in interest. Thanks to this strategy, you’d reduce your repayment by two years and save $2,927 in interest.
5. Cut down interest by making biweekly payments
Another way to get out of debt quickly — or at least quicker than you would otherwise — is by making biweekly payments. This strategy means cutting your monthly payments in half and making payments every two weeks — it’s particularly effective for student loans.
If your monthly loan payment is $300, for example, you’d pay $150 every two weeks. Just be sure that all $300, in this scenario, is submitted before your minimum payment due date.
As a result of this cadence, you’d make an additional payment by the end of the year. One extra payment can reduce total interest costs and reduce your repayment time.
Say you have a student loan balance of $35,000 at 5% interest, on a 10-year repayment term. Making biweekly payments can shave off a year of repayment and save you $1,113 in interest.
6. Attempt to negotiate and settle for less than you owe
If you’re in over your head with credit card debt, consider negotiating with your creditors and settling for less than you owe. Typically, this strategy is best if you’re delinquent with payments and debt collectors are contacting you.
Rarely does this tactic work in other instances, as creditors generally only grant settlements to borrowers who aren’t likely to repay their debt in full.
Based on your income and expenses, suggest a repayment plan that works for you and see what your creditor says. Depending on your situation, you might propose a lump sum or monthly payments; if accepted, get a full agreement in writing from the company outlining the plan.
Be wary of scammy companies offering debt settlement services for a fee. To be safe, work with a company accredited by the American Fair Credit Council.
What if debt settlement doesn’t work?
If you’re not delinquent but are struggling, ask your credit card company if they can lower the interest rate or establish a payment plan. Another option is to work with a nonprofit credit counseling agency — but do your research.
“It’s important to tread carefully and vet any advisor you engage, regardless of whether they’re at a non-profit or some other entity,” said Rebell. “Understand who is paying them and be sure their advice is not biased or influenced in any way that does not put you first.”
A nonprofit credit counseling agency may offer you a debt management plan where you work with a credit counselor who can provide support — and may be able to work with your creditor to get a lower interest rate. You deposit funds into a specified account and your credit counselor makes payments until your debt is paid off. To find an agency, start with the list of approved providers compiled by the Department of Justice (DOJ).
Irvine said you can do some quick math to determine whether it’s time to work with a nonprofit credit counselor.
“If your debt-to-income (ratio) exceeds 40%, then I think that is a critical line in the sand,” she said. “If you’re paying 30% in taxes, 40% in debt repayment, then it only leaves you with 30% to live off and save; that’s pretty challenging and not likely sustainable long-term.”
7. Consider consolidating and refinancing your debt
Getting out of debt can feel insurmountable. To make it more manageable and affordable, consider consolidating and refinancing your outstanding balances.
These strategies typically involve another type of loan that pays off your existing debt at a lower rate. Some options include:
Debt consolidation
You may qualify to get a personal loan at a lower rate that can be used for debt consolidation. For example, you could use a personal loan to pay off various credit card balances at higher rates. You’d trade multiple balances at higher rates with one loan at a lower rate.
When you’re ready to shop around, consider CNN Underscored Money’s top-rated debt consolidation lenders:
Our picks at a glance
| Lender | Rating | APRs* | Repayment terms | Loan amounts |
|---|---|---|---|---|
SoFi | 5 | 8.99% to 29.49% | 2 to 7 years | $5,000 to $100,000 |
Oportun | 4.4 | Up to 35.99% | 1 to 5 years | $300 to $10,000 |
Best Egg | 4.2 | 5.99% to 35.99% | 3 to 5 years | $2,000 to $50,000 |
PenFed Credit Union | 4.1 | 7.99% to 17.99% | 1 to 5 years | $600 to $50,000 |
Laurel Road | 4.1 | 9.49% to 23.25% | 3 to 5 years | $5,000 to $45,000 |
OneMain Financial | 4 | 18.00% to 35.99% | 2 to 5 years | $1,500 to $20,000 |
LendingClub | 3.9 | 9.57% to 35.99% | 2 to 5 years | $1,000 to $40,000 |
First Tech Credit Union | 3.9 | 9.29% to 18.00% | 2 years to 80 months | $500 to $50,000 |
PNC Bank | 3.8 | 8.19% to 30.00% | 6 months to 5 years | $1,000 to $35,000 |
Navy Federal Credit Union | 3.7 | 8.99% to 18.00% | 1 to 5 years | $250 to $50,000 |
* Rates as of Feb. 20, 2024 and may assume discounts
Balance transfer
If you have strong credit scores, you may qualify for a balance transfer credit card. This is specifically used to transfer your balances from one or multiple cards to another with a lower interest rate.
A balance transfer card is typically only a good idea, however, if you pay most or all your debt during the promotional period, which could span 12 to 21 months.
If you go this route, expect to pay 3% to 5% in fees and review when the promotional period ends. The interest savings can help propel your debt payoff.
For example, let’s say you have $5,000 in credit card debt at 18% and pay $125 per month. Then, you get approved for a 15-month, 0% balance transfer card with a 3% balance transfer fee.
To pay off your balance during the promotional period, your new estimated payment would be $343 and you’d save $2,542 in interest. While the interest savings is great, your monthly payment more than doubles. If you can afford that, this can be a worthwhile strategy.
Student loan refinancing
Private lenders, including banks, credit unions and online companies, offer student loan refinancing to borrowers and may advertise better rates than your current APRs. The better your credit, the likelier you can access those basem*nt rates.
If you have federal loans, though, consider this strategy carefully. If you refinance federal loans, you would become ineligible for federal government-exclusive forgiveness and income-driven repayment plans.
If you want to get out of debt fast and a lower interest rate can help, review your options, which include refinancing only your private student loans.
Related >> Best student loan refinance lenders
8. Work to boost your income
The amount you put toward your debt repayment is closely related to your current income and expenses. But you might wonder how to get out of debt when you’re broke (or at least feeling that way).
If you’ve reduced your expenses (step two, above) and hit your limit, work toward boosting your income. Some options include:
- Take on a side hustle. Use your existing skills to earn more on the side. You can freelance and offer your services or sign up for gig work (perhaps with a ride-share company). Another option is to pet sit or walk dogs through Rover, Wag, and Meowtel.
- Sell items. Take an inventory of what you own. What do you no longer need or use? Take those items and sell them using Facebook Marketplace, Poshmark, Mercari and OfferUp.
- Ask for a raise. Do some research on salaries for your job and industry and see if you could be earning more. Informed with data, and with your accomplishments to back it up, ask for a raise and earn more from your job.
- Change jobs or careers. Sometimes the best way to earn more is by changing jobs. A new employer may pay more for your experience. Also, consider transitioning to a different career that may offer higher pay.
If you want to figure out how to get out of debt quickly, these eight steps can help you get on the right track. While paying off debt can be tough, it’s possible. Once your debt is paid off, you can focus on wealth-building and earning interest rather than paying it.
Lesser-known tips for serious debt management
If you’re in serious debt, you may need an unconventional approach to handle what you owe.
Reconsider your tax filing status
Married federal student loan borrowers on an income-driven repayment (IDR) plan may want to change their tax status. Married filing jointly considers both incomes, whereas filing separately is based on the individual borrower. Discuss the advantages and drawbacks with a tax professional.
Another option is to change your withholding on your Form W-4. So if you usually get a tax refund, adjusting your withholding may boost your paycheck now so you can put more toward debt. Keep in mind that this strategy may leave you owing money when it’s time to file your taxes.
Look into ‘LRAPs’
Healthcare professionals may qualify for state-based student loan repayment assistance programs (LRAPs), such as one sponsored by the National Health Service Corps.
If you’re in another profession, research state, school and employer-based loan repayment programs. You can also find LRAPs via professional and educational groups, such as the Association of American Medical Colleges and the American Bar Association.
Attend Debtor’s Anonymous
If your debt is taking over your life and is compulsive, get support and resources through the 12-step Debtors Anonymous program.
Try a debt repayment app
Smartphone apps like Changed work by rounding up your purchases to the nearest dollar — and putting that amount toward your debt. Friends and family can sign up and have their spare change go to your debt, too. Like crowdfunding your repayment online, it’s an every-little-bit-helps approach.
Talk it out before considering bankruptcy
Consulting a certified credit counselor — see the DOJ’s list of approved agencies linked above — is a good first step in exploring debt management plans and more drastic measures.
Though bankruptcy isn’t an ideal solution — and definitely doesn’t offer a “fresh start” — it’s one more way to approach crushing debt. Bankruptcy will stay on your credit report for 7 or 10 years, depending on the type of bankruptcy you file. This option should be last on the list and considered carefully given the long-term credit consequences.
What’s the average debt per American?
The median household debt in 2022 was $80,220, according to Federal Reserve data. But when looking at debt loads by category, there are stark differences.
Median debt by age
| Age range | Median debt |
|---|---|
Less than 35 | $42,710 |
35-44 | $140,380 |
45-54 | $140,300 |
55-64 | $90,000 |
65-74 | $45,000 |
75 or older | $36,000 |
Source: Federal Reserve
Median debt by race, ethnicity
| Race, ethnicity | Median debt |
|---|---|
White | $93,900 |
Other | $84,200 |
Black | $44,900 |
Hispanic | $39,900 |
Source: Federal Reserve
Total outstanding non-household debt by product
| Product | Total debt |
|---|---|
Auto loans | $1.61 trillion |
Student loans | $1.60 trillion |
Credit card | $1.13 trillion |
Other | $550 billion |
Source: Federal Reserve Bank of New York, as of Q4, 2023
Average outstanding non-household debt by product
| Product | Average debt |
|---|---|
Student loan | $38,787 |
Auto loan | $23,792 |
Personal loan | $19,402 |
Credit card | $6,501 |
Retail credit card | $1,188 |
Source: Experian, as of Q3, 2023
Related >> Average student loan debt
How debt negatively impacts your life
Burdensome debt not only affects your financial and mental health but other areas of your life as well.
Credit eligibility
If you owe a significant amount relative to your income, your debt-to-income ratio (DTI) will be high. Your DTI is considered by lenders when you apply for credit, and a high DTI can make you ineligible (at least without a cosigner or co-borrower).
How to lessen this impact: Reduce your debt balances and increase income (see tips above).
High interest rates
Even if you get approved for a loan or credit, you may still face steep interest rates. Borrowers with bad credit will be charged the most — and it can add up. The annual percentage rate (APR) on loans directly affects the amount of interest you pay over the life of the loan.
And over-relying on the plastic in your wallet can be damaging. Currently, APRs on credit cards have hit their peak, nearly doubling in the last decade, according to the Consumer Financial Protection Bureau.
How to lessen this impact: Improve your credit scores, in part by repaying debt on schedule.
Debt cycle
If your debt creeps up and goes unchecked, you can easily get into an unrelenting debt cycle. To make ends meet, you borrow from one lender to pay off another, getting trapped in this vicious cycle.
How to lessen this impact: Figure out the underlying cause of the debt, such as lack of income or overspending.
Employer credit checks
Some employers in certain states may review your credit as part of a background check, especially if you work in a financial-related role or industry. If you have significant debt, it may show up on your credit check and potentially impact hiring decisions.
How to lessen this impact: Review laws in your state around employer credit checks, perhaps starting with your local office of the US Equal Employment Opportunity Commission.
Reduced federal benefits
If you default on federal student loans, the government could garnish 15% of your wages, and your tax refunds and Social Security benefits may be impacted as well.
How to lessen this impact: Use the US Department of Education’s Fresh Start program to get out of default and reinstate benefits.
Frequently asked questions (FAQs)
Secured debt is a loan that’s backed by collateral, or a type of asset. If your repayment goes awry, that asset could be vulnerable to seizure.
Unsecured debt, however, isn’t backed by collateral. You qualify for unsecured debt on the basis of your credit.
Track your debt repayment progress by using a spreadsheet, mobile app, or even pen and paper. Find an option that helps you stay consistent and motivated.
Using a new loan to pay off other debts may be helpful if you’ve figured out the root cause of your debt and can obtain a lower rate. Be aware of fees and monthly payments, and understand that another loan could lead to additional debt if not used wisely.
If you’re using too much of your available credit (high credit utilization rate) or have missed payments (delinquency) on your debt, it may hurt your credit scores.
If you’re struggling with debt, ask your creditors if they’re willing to lower your interest rate. It’s up to their discretion — not all lenders have hardship programs — but you can always ask.
Depending on the type of bankruptcy, your debt might be discharged or you’ll have a repayment plan. Debt settlement, on the other hand, refers to working with a company that claims it can help you with your debt and settle for a lower amount.
