How to Get Out of Debt
On February 25, 2026 By newsroom Topic: Debt Advice
Key Insights
- Understand Your Debt: Separate debts into categories (revolving and installment) to prioritize payments effectively.
- Stop Adding Debt: Unlink credit cards from online accounts, freeze cards, and rethink subscriptions to curb spending.
- Choose a Repayment Strategy: Use methods like debt snowball, avalanche, or blizzard to pay off debts faster.
- Consider Consolidation: Combine debts into one payment with lower interest for faster progress.
- Debt Settlement as a Last Resort: Negotiate lower payments but know it can impact your credit score.
Steps to Get Out of Debt
1. Calculate Total Debt
- List All Debts: Include all creditors, balances, and monthly payments.
- Credit Report: Review for accuracy and insights into your debt load.
- Prioritize: Focus first on revolving debts (e.g., credit cards) with high interest, then installment debts (e.g., car loans).
2. Stop Increasing Debt
- Avoid New Debt: Don't close accounts; instead, freeze or pause credit cards.
- Budget-Friendly Moves:
- Use cash for purchases.
- Cancel unnecessary subscriptions.
- Delay large purchases until debt is under control.
3. Choose a Debt Repayment Plan
- Debt Snowball: Pay off smallest debts first for quick wins.
- Debt Avalanche: Focus on highest-interest debts to save money long-term.
- Debt Blizzard: Combine both strategies to build momentum and save on interest.
4. Consolidate Debt
- Balance Transfer Cards: Move debt to a 0% APR card for promotional periods but watch out for fees and deadlines.
- Debt Consolidation Loans: Use a fixed-rate loan to combine debts into a manageable payment.
- Alternatives: Consider home equity loans or 401(k) loans cautiously as they involve higher risks.
5. Debt Settlement as a Last Resort
- Process: Negotiate with creditors to lower your debt after months of nonpayment.
- Impact: It may lower your credit score but can help avoid bankruptcy.
FAQ
-
How does paying off debt affect credit?
Repaying debt can boost your credit score over time. Debt settlement, however, can cause a significant temporary drop. -
What's the fastest way to get out of debt?
Pay more than the minimum due, increase payment frequency, and consider consolidating to lower interest. -
How much debt is too much?
Aim for a debt-to-income (DTI) ratio below 36% to maintain financial flexibility.
Bottom Line
Getting out of debt requires discipline, strategic planning, and commitment to your financial goals. By prioritizing debts, reducing unnecessary expenses, and sticking to a repayment strategy, you can regain control of your finances and achieve freedom from debt. If overwhelmed, consider seeking help from a credit counselor or debt consolidation company.
