We may earn a fee if you click on the links below. Compensation does not determine ranking. Not all brands are included. Learn more.

Updated by:
Published: Oct 02, 2023 17 min read

If debt is negatively affecting your life, you’re probably looking to get out of it fast.

Read on to learn why it’s important to pay debt as soon as possible, as well as different methods of doing so, including budgeting, consolidating your debt and getting help from a debt settlement company.

Table of Contents

How to get out of debt fast

You have several options when it comes to getting out of debt quickly and regaining financial freedom. Some of these are as simple as increasing your monthly payments, while others may require more planning, such as budgeting.

1. Understand Your Debt

Before setting up a debt repayment strategy, list all your outstanding debts to get a clear picture of how much you owe. This can help you decide which accounts to settle first and how much extra money you need to set aside monthly to get out of debt faster.

Start by gathering and reviewing your loan agreements and credit card statements. In these documents, you'll find information regarding your accounts' outstanding balances, repayment schedules, interest rates and other loan terms or fees.

You can find your loan agreements and monthly statements by logging into your bank or credit card issuer account using their website or mobile app. You can also contact the lender to request copies by mail or email.

2. Create a budget

Whether you're looking for greater personal accountability or simply want to take a methodical approach to debt reduction, budgeting can be a useful tool. There are budget apps and software you can link to your bank accounts and automate the process, or you can grab a sheet of paper and just do it the old-fashioned way.

The first and most critical step is to set your financial goals and educate yourself on your particular situation, including taking stock of your assets and liabilities. A budget could help you spot expenses — if any — you could do without.

But, even if you don't have this problem, budgets are a great way to rework your monthly spending and free up money that you can put toward paying down your debts.

3. Reduce your expenses

Once you create a budget, track your expenses and analyze where your money is going. You might find you can make minor tweaks to lower your bills and cut back on unnecessary expenditures. You can then use freed-up money for debt payoff or to create an emergency fund.

For example, you can start eating at home more frequently while limiting dining at restaurants and ordering takeout only for special occasions.

You may also consider canceling subscriptions you don't need or use as often. These can include streaming services, gym memberships, app subscriptions and more.

4. Consider the debt snowball method

The debt snowball method is a debt repayment strategy that focuses on eliminating your smallest debts first.

The idea behind the method is to make the minimum monthly payments on all of your debts, but put any extra cash you have toward the smallest debt. Once you pay off your smallest balance, you will take the money you were previously using to pay off that debt and apply it to the next smallest. This cycle will continue until you are debt-free.

This method keeps many people motivated, since they can see results right away. However, it may not be the best option for those with multiple high-interest debts since you can end up spending much more over time due to additional interest charges.

5. Consider the debt avalanche method

While the debt snowball method focuses on paying off your smallest debt first, the debt avalanche method (also known as debt stacking) focuses on paying off the debt with the highest interest first.

The first debt will take the longest to pay off, but once it’s settled, you can apply the money you used to pay it to the next debt with the highest interest rate. As you move through this cycle, the remaining debt will take progressively less time to eliminate.

The benefit of the debt avalanche method is that you will pay less interest overall, and more money is applied directly to the principal each month. The faster you can pay down your principal, the faster you can pay off your credit card balances and other debts.

6. Ask for better interest rates

Lowering your interest rates may be one of the quickest ways to reduce what you owe. A lower interest rate means you pay less over the life of the loan. For example, if you take out a $5,000 personal loan with a 6% interest rate, you’ll pay $300 in interest charges. On the other hand, if the loan had an interest rate of 3%, you would only pay $150.

Additionally, when you pay debts with lower interest rates, more of your money goes directly to the principal balance (and therefore, the quicker you can eliminate your debt). Getting a lower rate can reduce your monthly loan payments.

While you usually can’t negotiate a reduction in your balance, you may be able to get your creditor to lower your interest rate. Each company has different rules for negotiation, but you’ll never be penalized for asking.

Entering the negotiation with some leverage will be your best chance of success. If you can find a competitor that offers a lower rate on an equivalent credit card or loan, your creditor may agree to match the interest rate. Try to avoid leveraging a temporary or promotional rate because creditors are much less likely to match those.

Note that having a good or excellent credit score and an established history of on-time payments also improves your odds of getting a lower rate. If you do, be sure to mention it during negotiations with your lender.

7. Earn extra income if you can

If your primary income is not enough to cover your debt payments, consider picking up a side hustle, at least temporarily.

There are plenty of ways to make more money and boost your monthly income. Some common part-time jobs include rideshare driver, food delivery, transcribing and cleaning.

You can use the extra income to make additional payments toward reducing your debt. You should also consider using tax refunds, work bonuses and other unexpected cash to pay down your bills faster.

8. Take out a debt consolidation loan or balance transfer credit card

A debt consolidation loan or balance transfer credit card can help simplify your financial situation if you have multiple accounts with large balances and high interest rates. With these, you can combine multiple bills into one manageable monthly payment — hopefully at a lower rate.

Many financial institutions offer debt consolidation loans that can help you combine and resolve unsecured debts. These personal loans let you pay off multiple balances faster. Some of the best debt consolidation loans can save you money in the long run.

A balance transfer credit card works similarly by letting you consolidate the balances of multiple cards into one. Then, you can focus only on one monthly credit card bill with a fixed due date. The best balance transfer credit cards will even provide a low intro APR (or 0% APR) for anywhere between 12 to 21 months when you transfer your balance.

9. Pay more than the minimum

Paying only the minimum each month will cause you to pay much more in interest over the life of your loan. Paying more than the minimum due on your accounts is an effective way of getting out of debt quicker. It could also potentially improve your credit score by lowering your credit utilization ratio. This ratio — which reflects how much of your available credit you’re using — is an important factor credit bureaus consider when calculating your score.

10. Ask a credit counselor about a debt management plan

If you would prefer to have a financial expert assist you in managing your debt, you can meet with a credit counselor. These typically work on a nonprofit basis to assist people with low income or poor credit scores. They can often guide you regarding debt consolidation, refinancing, bankruptcy and more.

Your counselor might recommend you enroll in a debt management plan (DMP). These plans are designed to help people keep up with their monthly bills until they settle the outstanding balance.

If you sign up, you’ll have to pay a monthly lump sum to the credit counseling agency, and it will pay your bills on your behalf. Your counselor will also contact your lenders to help you negotiate credit card debt, such as lower interest rates or monthly payments.

A DMP is carried out over an extended period (often three to five years) in which you're usually not allowed to use your credit cards or open new credit lines. However, your credit counselor will ensure that you have the information, resources and guided experience to handle your debt independently once the process is over.

While nonprofit credit counseling agencies offer free financial assistance, signing up for a DMP typically has a set-up and monthly fee of around $50 or less. Also, keep in mind that DMPs are mainly helpful for people struggling with credit card debt. Student loans and secured debts such as mortgages and auto loans aren't eligible.

11. Consider bankruptcy as a last resort

Bankruptcy is another option for resetting your personal finances, but it should be your last resort. A bankruptcy can remain on your credit report for up to ten years and negatively impact your credit history.

There are two main options for consumers: Chapter 7 and Chapter 13 bankruptcy. Under a Chapter 7 filing, the court assigns a trustee to review your finances and liquidate any assets that are not protected under bankruptcy exemptions. The funds are then used to pay your outstanding debt.

When debtors file for Chapter 13, also known as reorganization, they enter a court-mandated repayment plan where debts must be repaid over a period of three to five years. Personal loans, credit cards and medical bills may be reduced or discharged, but other types of debt, like student loans, must still be paid. To file for bankruptcy, you must contact a bankruptcy lawyer and file the required financial documentation with the court.

Pros and cons of having debt

Carrying some debt can have certain financial benefits as long as you make timely payments and avoid accruing excessive interest charges.

For example, having different types of debt, such as with a mortgage and a credit card, improves your credit mix, a factor used to calculate credit scores. Paying all your accounts in time can also raise your score since it shows lenders that you're a responsible borrower.

However, the potential drawbacks of debt can outweigh its benefits, especially if you rack up more than you can handle. Outstanding debt that sticks around for too long can lead to the following:

  • Additional interest: Debt comes with interest charges that can add up over time and make paying down your principal balance more difficult.
  • Risk of default: If you start making late payments or miss them, you may default on your loans. This can damage your credit score and make it harder to qualify for new credit accounts.
  • Collections: If you're over 120 days late paying a bill, it may be sent to a debt collection agency. Lenders assign or sell your unpaid debts to collection agencies that use aggressive tactics to get you to pay. Like a defaulted loan, a collection will lower your credit score significantly.
  • Lower credit score: Excessive debt relative to your monthly gross income, along with any missed or late payments, will negatively impact your credit history and your ability to borrow in the future.

With these downsides in mind, it's essential to carefully consider how much you can afford to repay before taking on new debt. You should also have a straightforward repayment plan and good financial habits to avoid falling in a debt cycle.

Is debt settlement a good idea?

Debt settlement, also known as debt relief or adjustment, is the process of negotiating with lenders to settle your accounts for less than what you currently owe. You can approach creditors directly or hire a debt settlement company to handle the process.

While debt settlement may seem like a better option than paying the full amount you owe, it can damage your creditworthiness. Lenders are not always willing to negotiate outstanding debts, and if they do, the account will be marked as "settled" in your credit report for seven years.

A settled account generally has a less negative effect on your report than a charge-off (when a collector essentially gives up on a debt and reports it as unpaid). However, it will still impact your future credit approval odds as lenders may consider settled debts a risk sign since you didn't fulfill the loan's original terms.

Hiring a debt settlement company can have a more damaging outcome. These companies often charge hefty fees and provide no guarantee for their services. They also may advise you to stop paying your bills until they reach an agreement with your lenders, which can take years.

Missing payments is one of the most credit-damaging decisions you can make. It can lead to high interest charges, penalty fees, charge-offs, collection accounts and possible lawsuits.

And even if the debt company successfully reduces your debt, it’s worth noting that you might have to pay taxes on the forgiven amount if it’s reported to the IRS.

Debt management vs. debt settlement

Debt settlement and debt management sound similar, but the differences between them can make or break your credit.

Debt settlement implies paying less than what you owe, which effectively breaks the terms of your loans and affects your creditworthiness. Debt management, on the other hand, involves organizing a repayment strategy that covers your total outstanding balances to keep your accounts and credit in good standing. Your debt management counselor might even try to get you lower interest rates and monthly payments.

It's also worth noting that debt management plans are offered by nonprofit credit counseling agencies that can provide ongoing support, including financial counseling, throughout the process.

How to Get Out of Debt FAQs

How does a debt consolidation loan work?

When you take out a debt consolidation loan, you get a set amount of money from a lender to pay off your credit cards, personal loans and other debts. Then, you're left with only one monthly bill from the debt consolidation loan, often with a lower annual percentage rate (APR) than the other debts you settled.

Should you pay debt collectors?

Paying debt collectors might not necessarily help you improve your credit score. Paid collection accounts can stay on your credit report for seven years. And while some newer credit score models don't factor in paid collection accounts when calculating your credit score, many lenders still use older iterations that still include them. However, if the collection account is legitimately yours, you should consider paying it fully or negotiating to settle for less to avoid lawsuits.

Do debt management plans hurt your credit?

A debt management plan (DMP) will not affect your credit further. Instead, it can help you avoid late payments that negatively impact your score and your chances of getting new loans later on. A DMP could also lower your interest rates, saving you money in the long run.

How long does it take to get out of debt?

How long it takes to get out of debt depends on several factors, such as your income and overall amount of debt. However, note that it can take several years if you have multiple outstanding accounts with high interest rates.

How much debt is too risky?


The answer depends on several factors, including your income, expenses and financial goals.

One indicator that can help you determine whether your debt is too high is to figure out your debt-to-income (DTI) ratio. To calculate your DTI, divide your monthly debt payments by your monthly gross income. Lenders usually consider a DTI ratio of 36% or less to be ideal, while a DTI ratio of 43% or higher is seen as risky.

Can I negotiate with my creditors to settle my debts?

Your lender might be willing to work with you if you can't meet your minimum payments. However, note that they're under no obligation to negotiate with you and might still report your account as defaulted and hand it over to a debt collector.

Summary of Money’s How to Get Out of Debt

Getting out of debt can be challenging, but it's possible with careful planning.

By setting up a budget, reducing your expenses and prioritizing high-interest accounts, you can settle your bills faster and save on additional interest charges. And if you need help organizing a debt-relief strategy, nonprofit counseling agencies can provide assistance.

If you've reached a point where general budgeting isn't sufficient, there are additional options you can consider. These include debt consolidation loans or a debt management plan. Filing for bankruptcy is also an alternative, but it should be a last resort.