How to Get Out of Debt in 2023

According to reports from the second quarter of 2022, the total of all household debt in the United States is a whopping $16.15 trillion. Mortgages make up the bulk of that debt, with student loan, auto loan and credit card debt trailing behind.

On average, adults in the United States carry debt loads ranging between $20,800 and $146,200. If you’re in debt and looking for a way to pay it off, making a plan is a critical step. Find out more about how to get out of debt below.

1. Collect All Your Paperwork in One Place

Before you can get out of debt, you need to know how much debt you actually have. You should also know who you owe and what the terms are, as this can help you prioritize debt payments to pay them off faster.

Start by collecting all your debt paperwork in one place and creating a master list of everything you owe. You can do this in a spreadsheet or with a pen and paper. Information to gather includes:

  • Statements for all your debts. One way to do this is to spend a month saving all your financial mail and email so you have a comprehensive picture of your debt.
  • Regular bills that aren’t debts. Your cell phone and utility bills, as well as your rent, should all be included when you gather this financial information. 
    Information about income. Look at paycheck stubs or your bank accounts so you know what, on average, you can expect in income each month.
  • Your credit reports. Get your free credit reports at to ensure you know about all the debt you owe.

Tip: Sign up for ExtraCredit to see your credit reports and 28 FICO® scores in one place.

2. Create a Budget and Determine What You Can Pay Every Month

Using the information you gathered in the above step, create a monthly budget. Make sure you cover all your bills and minimum debt payments. When possible, include an amount that can go toward building your savings. Allocate funds for essentials, such as groceries and gas.

Once you cover all the needs for the month, figure out how much money you have left. How much of that can you put toward extra debt payments so you can start getting ahead on debt?

3. Manage Your Debts in Collections

If you see that you have any debts in collections when you pull your credit reports, make sure you have a plan for taking care of them. Collection accounts have a serious negative impact on your credit score. Creditors may also sue you and try to collect on these accounts via wage garnishments or bank levies if you don’t take action to manage collections. That can throw a huge wrench into your plan for getting out of debt. 

Tip: If you don’t enjoy manual calculations, check out Tally. You can use Tally to total up your expenses, pay down credit card bills, and generally figure out where you stand.

4. Consider Your Options

There are two main approaches to paying off debt as quickly as possible: the snowball method and the avalanche method.

The snowball method involves paying off accounts with the lowest balances first. You take any extra money you have—even if it’s just $50—and add it to your regular minimum monthly payment on that small balance. When that balance is paid off, you take the extra $50 plus the minimum payment and add it to the next biggest balance. You keep doing this as you work your way up to larger balances, paying your debt off faster and faster.

With the avalanche method, you tackle accounts according to interest rates. You start by paying off accounts with the highest interest rates first. The thought behind this method is that you save money in the long run by tackling high-interest debt first.

5. Try to Reduce Your Interest Rates

Interest refers to how much your debt costs. If you have a lower interest rate, your debt costs less and you can pay it off faster. Here are some ways you can try to reduce interest rates on your debts:

  • Ask for a lower interest rate. If you’re a credit card account holder in good standing and your credit history and score has improved since you got the card, you may be able to get a better rate. Call customer service for your card and let them know you are looking for a better deal. They may agree to lower the rate to keep you as a cardholder.
  • Look into debt consolidation or refinancing. A debt consolidation loan provides funds you can use to pay off higher-interest debts. Refinancing occurs when you get a new loan for a home or car. If you had lackluster credit when you got your auto loan, for example, you may be able to refinance it for a lower rate if your credit has improved. 
  • Get a balance transfer credit card. You may be able to transfer balances from a credit card with a high interest rate to one that has an introductory low APR offer. This may allow you to pay off the debt over the course of 12 to 22 months without incurring any more interest expense. 

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Do Your Best to Pay More Than the Minimum

Only paying the minimum on high-interest debt, such as credit card debt, doesn’t get you out of debt fast. It can take years—dozens of them—to pay off credit card balances if you’re only making minimum payments. 

Instead, put more than the minimum on your debt whenever possible. You may also want to put any additional funds you receive—such as a tax refund—on your debt to help with this process.

Consider More Options for Getting Out of Debt

Creating a budget, managing your money wisely, and making extra payments toward your debt all help you get out of debt. Here are some other ways you can deal with debt:

  • Increase your income while cutting unnecessary spending. Join the gig economy with a side job to earn extra money, or sell things you don’t need via online marketplaces.
  • Undergo credit education and counseling. These services can help you make the most of your monthly budget.
  • Engage in debt settlement. You may be able to negotiate with creditors, especially for accounts in collections, to settle debts for less than you owe. Just make sure you understand any effects on your credit.
  • Enter a debt management plan. During such a plan, you make a single payment to a trustee. They use those funds to pay your debts, hopefully in a way that gets you out of debt faster.
    Declare bankruptcy. If you find you’re unable to pay your debts, much less make extra payments, you may need another option. Chapter 7 and Chapter 13 bankruptcy are potential considerations.

How to Avoid Getting into Debt

Paying off debt doesn’t have to be impossible, but it can be challenging. For many people, it requires altering years’ worth of financial habits. If you’re not already in debt, it may be easier to stay out of it. Create a budget and stick to it, spend wisely and avoid using credit cards for things you don’t need or can’t afford to buy with cash.

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