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How to Get Out of Debt: A Step-by-Step Guide to Financial Freedom

by Gerri Detweiler

How to Get Out of Debt

To get out of debt, you need a plan, and you need to execute that plan. But that can be easier said than done. It’s easy to become overwhelmed with all the steps you need to take. And it’s also easy to lose motivation if you don’t realize how much progress you’ve already made.

You’ll need to make all necessary adjustments to your budget along the way so you don’t overspend and slide back into debt. Plus, if you don’t have an emergency fund, consider setting some money aside in savings before you get started on your plan.

To help you get started — and then stay on track — we’ve created this simple get-out-of-debt checklist. Keep it someplace where you’ll see it often, and make it your goal to check a task off the list each day (or each week), depending on how quickly you want to become debt-free.

Get Prepared to Get Out of Debt

If you want to do this right, you want to make sure that you know where you stand before you start. You need to have a complete picture. Here’s what you need to do.

Make A List

Having everything written out in front of you is really the key to success here. Plus, once you’ve written it all out, and it’s right there in black and white, it may not seem as insurmountable as it did before.

  • Make a list of all your debts: name of creditor, interest rate, balance, minimum monthly payment.
  • Also list the three-year payment for each debt, as found on credit card statements.
  • Remember to include loans not listed on your credit reports (e.g. family loans, medical bills).

Lower Your Rates

Paying high interest rates on existing debt causes your debt to really mount up, and makes paying it off much more difficult. If possible, you want to lower those interest rates. Here’s what to do:

Get Your Number

Once you know what your total payoff number is, you’ll have a real, complete goal to work towards.

  • Total the three-year pay-off amount for all your credit cards.
  • Add the monthly payments for all other debts.
  • Write down the result: Your Total Monthly Payment.

Plan Your Strategy

There are plenty of ways to attack this problem and you’ll likely approach this using a variety of tools and methods. Plan your strategy carefully.

  • Determine if you can afford to pay the Total Monthly Payment until your debt is paid off.
  • If not doable, contact a credit counseling agency and/or bankruptcy attorney for advice.
  • If doable, decide which debt to pay off first (highest rate or lowest balance?) — “target debt.”
  • Set up “auto pay” for required minimum for all debts except target debt.
  • Pay as much as possible toward target debt until paid off.
  • Choose new target debt and pay extra toward that one, and so on.

Monitor & Adjust

Once your plan is set, don’t get too comfortable. You’ll need to track your behavior closely to make sure you’re making progress, and you’ll want to make adjustments when necessary.

  • Monitor your credit score each month to see if your credit score improves (over time it should).
  • As your credit score improves, reconsider consolidation loan or balance transfers to save money on remaining debts.
  • Stick with your plan until your debt is paid off.

Celebrate Your Debt-Free Date!

  • Kiaunta Hubbard

    Maintain permanent and consistent employment in shaky economy…also will help.

    • Gerri Detweiler

      True! If you can.

    • Kay Xu

      Good advice :)

  • Gerri Detweiler

    If you cash in your IRA early, you will not only pay taxes on it (unless it is a ROTH), you also pay a 10% early withdrawal penalty. That means that money is not going to go very far. Before you use your retirement money to pay off consumer debt, I would suggest you at least talk with a reputable credit counseling agency to see if there’s a way to get out of debt without using this money that you will no doubt need when you do retire.

  • Credit Experts

    That’s good to know. Thanks for sharing your encouraging experience.

  • Gerri Detweiler

    Stan –

    Thanks for the feedback. TWe’d love to hear more about how you got out of debt!

  • Credit Experts

    Congratulations on your progress.

  • Credit Experts

    Agreed. Thanks for adding that.

  • justpeachy

    That’s great. I used them about 12 years ago and it was one of the best things I have ever done.

  • Credit Experts

    Quincy —

    If you want some early small victories, some people recommend the “snowball” method, where you pay minimums on the largest bills while you work at paying them off, smallest to largest. Once the smallest one is paid off, you put the money you had been paying toward the next-smallest and so on. Another way is to pay the highest-interest-rate balance first. Use the one that makes the most sense to you. Read more here: 5 Ways To Get Out of Debt: Which Will Work for You?

    And good luck.

  • Victoria G.

    What is CCCR? Thank you.

    • Gerri Detweiler

      I assume Jeanne meant CCCS which stands for Consumer Credit Counseling Services. You can find an agency via the website of the National Foundation for Credit Counseling.

  • Victoria G.

    And how would this impact/affect my credit score? I have a very good credit score, but I have A LOT of debt that I would like to pay off/consolidate. I’m just afraid/nervous of using an “agency,” for lack of a better word. Thanks in advance for any advice you can offer!

    • Gerri Detweiler


      If you have a lot of debt, understand that it probably already is affecting your credit scores. (I would recommend you go ahead and get your free credit score to find out how.

      In addition, we’ve written more about how these options affect your credit here: Will Debt Consolidation Help or Hurt Your Credit?

  • Gerri Detweiler

    Glad to hear your score is good and you are hoping to keep it strong! Thanks for the feedback.

  • Gerri Detweiler

    Paying those old collection accounts won’t improve your credit scores in the short term. You can read more about that here: The 7 Biggest Questions About Debt Collections & Your Credit

  • Gerri Detweiler

    It sounds like you have done what you can to protect yourself (credit freeze, law enforcement etc.) I am not sure what your bank will do but I can’t imagine they will pursue you for a crime committed against you. Have you changed the bank account you deposit your Social Security check into? If not, talk with your bank. It would seem to be a reasonable precaution.

  • Gerri Detweiler

    John – Thanks for your kind comments! Some creditors have their own policies that may not make sense to consumers, but are part of the way they do business. Credit unions, in particular, since they are member owned may hesitate to settle debts. But you may be able to negotiate when it goes to collections. I will ask Michael Bovee to weigh in.

    • John T

      That would be great Gerri, thanks. I hate that this last debt is hanging over my head. On a different note, real excited to see the changes in Fico 9. Apparently, settled debts don’t negatively affect your credit score anymore when a creditor uses Fico 9. Is that your understanding of it?

    • Michael Bovee

      Hi John,

      As Gerri mentioned, some banks, like credit unions, and smaller state or regional banks, are difficult to negotiate and settle with. My experience with accounts like this will often be:

      Do not target them for a reduced payoff at all.
      Settlements are not reached until attorney placement, or once sued.

      The settlement percentage you may be able to achieve are not great in these instances. Realistic targets are often not going to be below 50% of today’s balance, and can be upwards of 80 percent.

      Great job negotiating your other credit cards! Those deals you settled for are not common place at all.

      Given your success with settling your Citibank and Capital One accounts, you will come out way ahead of what I would consider typical (given your list of creditors), no matter the outcome with the credit union debt.

  • Gerri Detweiler

    Thank you! But I am not sure I understand your question – using what? Credit scores? If so, most creditors of all types do.

  • Credit Experts

    It can’t hurt to ask. You may also want to check with a bankruptcy attorney. (An initial consultation is usually free.)

  • Credit Experts

    Yes, you are, per terms of original agreement. Once the balance (and any interest or fees) are paid, you do not owe further. But if you have not canceled a card, we suggest you reconsider. Here’s why: Does Closing Your Credit Card Account Affect Your Credit Score?

  • Gerri Detweiler

    It sounds like the very old debts should not appear on your credit reports. It’s hard to say exactly because it’s not clear exactly what’s being reported, but we wrote about that issue here: Does Your Old Debt Have an Expiration Date?

    As for the recent delinquent debts, paying them probably won’t boost your credit scores in the short term.

    It might make sense for you to talk with a credit counselor to see whether they can help you come up with a plan for getting some breathing room in your budget. You can find a counselor through the National Foundation for Credit Counseling.

  • Lil25

    My only debt is student loan debt. The amount is currently $62,892. I make one payment for all my loans. They are all federal loans from grad school at 6.8% interest, so consolidating will not help. Neither will bankruptcy. I already do autopay. Which of these will tips will help? I do not qualify for PAYE or IBR or any type of loan forgiveness.

    • Gerri Detweiler

      Why don’t you qualify for IBR or PAYE? Is it because your income is too high to reduce your payments? If that’s the case, and you’ve exhausted all your options, then I am at a loss in terms of what to suggest other than to encourage you to continue to pay as much as you can and check back into those programs from time to time to see if requirements have changed. Student loan debt is an enormous problem and for many there is no simple solution.

  • Stephanie

    I have the worst credit score and am losing sleep from being in debt. I need a plan to get myself out of debt so I can move and not be stressed. What you suggest be my best course of action.

    • Credit Experts

      Stephanie —
      It couldn’t hurt to talk to a credit counselor, particularly because this is affecting your health. Here’s how to find a counselor through the National Foundation for Credit Counseling. Depending on your amount of debt and income, it may or may not be the right answer for you. From your question, it’s hard to know whether you should be talking with a bankruptcy attorney, credit counselor or simply someone who can help you with a realistic budget you can stick to. But we hope a counselor, with more information about your specific situation, can offer guidance.

  • Mary

    It’s true that many people get into debt because they lose their jobs. But some people get into debt despite having well paying jobs. It’s good to share information so that people have a plan to save while they have a job so they can weather a job loss. And for those who accumulate debt beyond their means while employed, it’s good to give them a plan of action to “right the ship.” Hope you find something that helps you weather your storms.

  • The Coupon Vixen

    These were all fantastic to tips and I used many of them to help me get out of debt. I also learned how to save more money on everything from groceries to clothing. Having this extra money helped me pay down debt sooner and I like to help others do the same on my blog.

  • Kent Salmen

    Just spend less than you make.

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  • Meet Our Expert

    gerri_detweiler GravatarGerri Detweiler is's Director of Consumer Education. She focuses on helping people understand their credit and debt, and writes about those issues, as well as financial legislation, budgeting, debt recovery and savings strategies. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of
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