Whether you’re in over your head with credit card debt or you need a strategy to pay off loans faster, it’s possible to work your way to a positive bank balance. But getting out of debt will require short-term lifestyle sacrifices, and your credit may take a hit. We’ll help you choose the best debt solution for your financial situation and point you toward resources to get started.
The first step toward paying off debt is to take a hard look at the numbers. Make a list of all of your current balances, the interest rates and the minimum monthly payments.
Then create a simple budget, listing all of your expenses for the past few months. Subtract your expenses from your take-home income. You’ll need this number for the next step.
If your income doesn’t cover your expenses, take a look at how to get out of debt on a low income.
Assess your financial situation
The best debt solution for you will depend on factors like whether you can afford to make the minimum payments on your current debts, your credit score and if you’ve already missed payments. Answer the following questions before moving forward:
- Can I afford to pay the minimum or more than the minimum on all of my debts? Take a look at the budget you made in the last step. Is your take-home income minus your expenses more than enough to cover the minimum payments? Any additional cash can be allocated toward paying off your debts faster.
- Am I current on all of my payments? Your payment history will determine which debt solutions are possible for you. For instance, creditors may be more willing to lower your interest rates if you haven’t missed payments.
- What is my credit score? Debt solutions like balance transfer cards are typically available to borrowers with good or excellent credit. Don’t know your score? Find out for free with LendingTree Spring. Checking won’t affect your score.
Once you have a clear picture of your finances and credit, you’re ready to learn how to pay off debt.
| What is it? | Consider if… | |
|---|---|---|
| Reach out to creditors | Calling your credit card company or lender to negotiate terms | You’re in debt (everyone should try this first) |
| Snowball/avalanche methods | Making more than minimum payments toward smallest/highest interest debts | You can afford your monthly debt payments |
| Debt consolidation loan | Transferring debts to a single loan with a lower interest rate | You want to simplify and lower your monthly debt payments |
| Balance transfer credit card | Transferring credit card debts to one card with promotional 0% APR period | You have good/excellent credit and can pay off debt before promotional APR ends |
| Credit counseling | Working with a certified credit counselor to pay off your debts | You need help to pay off your debts or can’t afford minimum payments |
| Debt settlement | Making a deal with creditors to pay less than you owe | You’ve exhausted all your other options and are behind on payments |
| Bankruptcy | Declaring that you can’t afford to pay off your debts in part or in full | You’ve tried everything else |
Reach out to creditors
Many creditors have hardship or credit card debt relief programs that can help you restructure your debt when you’re in a pinch. They may be willing to lower interest rates, extend your loan term to lower your monthly payments or even defer payments for a set period of time. This can be helpful if you need emergency debt relief because you’ve lost your job.
If you’re current on payments and you just want to save every dollar you can, you can try reaching out to your credit card company to ask for a lower APR. A LendingTree study showed that 76% of these requests were granted, so your odds may be better than you think.
Snowball or avalanche methods
Consider the debt snowball or avalanche method if you can afford to make more than the minimum monthly payments.
With the debt snowball method, you’ll put any extra cash toward paying off your smallest debt. Once that debt is paid off, you’ll move to your next smallest debt, and so on. You’ll knock out small debts fast, creating momentum (and possibly motivation) as you go.
With the debt avalanche method, you’ll put any extra money toward paying off your debt with the highest interest rate first. Once that debt is cleared, you’ll move to the debt with the next highest interest rate. This will help you save the most money on interest payments.
According to a 2023 LendingTree study, these methods can be equally effective, so choose the one you’ll stick with.
Debt consolidation loan
You can replace your current debts with a single debt consolidation loan, ideally with lower rates to save money on interest. For many borrowers, combining several monthly payments into one is a relief in itself.
While there are debt consolidation loans for bad credit, you may not qualify for lower rates with poor credit. Use a debt consolidation calculator to see if a consolidation loan is worth it for you.
See Personalized Debt Consolidation Loan Rates
Balance transfer card
A 0% balance transfer card is a credit card with a promotional 0% APR period that typically lasts between six and 21 months. Because these cards don’t charge interest for a set period of time, balance transfer cards are a common solution for borrowers wondering how to get out of credit card debt.
You’ll need good or excellent credit to qualify for a balance transfer card. Check your budget to make sure you can afford to pay off the balance in full before the promotional period ends. Otherwise, you’ll be stuck paying high interest rates on any remaining balance.
Credit counseling services
If you’re in over your head with debt, you can find a credit counselor to help you get on the right track. Reputable credit counselors typically work for nonprofit organizations and charge low fees to help you create a debt management plan to pay off your debt in three to five years. They help with credit card debt and other types of consumer debt.
Your credit counselor can reach out to your creditors on your behalf to negotiate your debts, and having an advocate on your side with financial knowledge can help you take charge of your debt. Know that if your credit counselor successfully settles your debts, it may temporarily affect your credit score.
Debt settlement
Debt settlement is a form of debt relief in which you agree to pay a smaller amount than you owe in exchange for wiping your debt clean. You can negotiate your own debt settlement, but there are also debt settlement companies that do so on your behalf in exchange for a fee. They may be able to negotiate credit card debt forgiveness, settling your credit card debt for less than you owe.
Debt settlement will affect your credit. If you settle your debts, the settlement will appear on your credit report for up to seven years.
Bankruptcy
If you have explored all of your other options and are already delinquent on debt or have several accounts in collections, you could consider filing for bankruptcy.
Bankruptcy can offer a fresh start for people who can’t pay debts, but it comes with consequences. Your credit will take a major hit, the bankruptcy will stay on your report for seven to 10 years, and you may have to liquidate your assets.
Considering bankruptcy? Read more about the most common types: Chapter 7 and Chapter 13 bankruptcy.
Frequently asked questions
Debt is money that you owe to another party, often referred to as a creditor or lender. Lenders typically charge interest, which is the cost of borrowing money calculated as a percentage of the total amount borrowed.
Debt consolidation is combining several debts together into a single loan or credit card. You’ll use the new loan or credit card to pay off existing debts and then make one monthly payment to your new loan or card. Debt consolidation is a solid strategy if you can get lower interest rates than what you’re currently paying, as this can help you save money.
In order to pay off credit card debt fast, you’ll need to pay more than the minimum payments on your cards every month. Save your money, cut out any unnecessary expenses and put any savings toward your credit card debt.
