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How to Get Out of Debt in 2018: A Step-by-Step Guide to Financial Freedom

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How to Get Out of Debt

Article Updated August 24, 2018 by Elisa Rogers

To get out of debt, you need a plan, and you need to execute that plan. That’s why we’ve created this simple, six-step, get-out-of-debt checklist that can help you leave that financial burden behind you.

As you work on your plan, 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 beforehand.

Keep this checklist someplace where you’ll see it often (like your refrigerator door, or your vision board if you have one), 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.

What Is the Best Way 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:

  • Gather your most recent statements for all loans and credit cards.
  • Get your free annual credit reports to check them for accuracy and to identify all debts.
  • Get your free credit score at to find out whether you’re eligible to lower your interest rates or for a debt consolidation loan.
  • Check the National Student Data System to gather all student loan information.
  1. 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.
  • List how much you’ll need to pay in order to zero-out the cards’ debt within three years, as found on credit card statements.
  • Remember to include loans not listed on your credit reports (e.g. family loans, medical bills).


  1. Lower Your Rates

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

  • Based on your credit, you may qualify for much better interest rates on credit cards.
  • Open a free account with and see what kind of low rate balance transfer credit cards you can get.
  • Check out student loan consolidation and Income-based Repayment at
  • Call your card issuers to ask for lower rates on credit card balances.
  • Consider a consolidation loan and/or balance transfers to pay off high-rate credit cards at a lower rate.
  • Find out if you can refinance a high-rate auto loan.


  1. 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.


  1. 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. Remember though, bankruptcy has a huge impact on your credit score, and if you’re able to work out a payment plan with your creditors, it can be avoided.
  • If doable, decide which debt to pay off first (highest interest rate or lowest balance?) — “target debt.” This is also known as the “snowball” or “avalanche” method.
  • 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.


  1. Monitor and 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 a consolidation loan or balance transfers to save money often spent on interest charges for remaining debts. (Your interest charges are often listed on your credit card statement.)
  • Stick with your plan until your debt is paid off.


  1. Create an Emergency Fund

You may think that while paying off debt, you don’t have money to save, but this is essential. Life happens, so if anything comes up, like a job loss, medical bill, or car repair, you’re covered. The suggested amount is three to six months’ worth of expenses, but if that’s not immediately possible, aim for one months’ worth – that’s a great starting point.

  • See which expenses can be cut out of your budget. If you eat out multiple times a week, see if you can cut it down to only once a week (everyone needs a little bit of money for fun).
  • Automate your savings. See if your employer will let you contribute part of your paycheck to a savings account. The ideal amount is 10% to 20%, but if you’re trying to get out of debt, this might not be possible. See if you can start with 5% each paycheck.
  • If you can’t automate your savings from your paycheck, have your savings automated from your checking account each payday. That way, you don’t accidentally spend this money and you won’t miss it.
  • If you receive a bonus or a pay raise, see if you can afford to contribute some of that money to your emergency fund.

As you begin to work this system, keep in mind that it’s not easy. Just like losing weight, losing your debt takes work, but if you genuinely want to slough of that stressful debt, your perseverance can make it happen. And don’t fret if you need to make adjustments along the way. This isn’t about a quick fix, it’s about changing your habits and behaviors so you can achieve your financial goals.

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  • 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.

    • Eric Camp

      Look into consolidating the loans with a private lender like Darien Rowayton Bank or SoFi. We just reduced the interest rate on my wife’s loans from 7.25% to 3.5% and the rate on my student loans from 5.75% to 3.75%.

  • 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.

  • Don

    Hi, I am trying to work through several old debts without filing bankruptcy and have been looking for a “how to” book that would help. I found this one online but can’t seem to find any other information about it, are you familiar with this book or do you have another all-in-one book that you can recommend?



    • KerriD

      hi. if they are over 7 yrs old dont worry about them. in addition, some companies will sell the debt to 3rd party collectors to try to collect even will attempt to threaten or scare you to pay. let it go. if it is student loans etc, pay those with a consolidation contract (not loan) with the federal student loan org…… they will work with you.

  • Christy Harmon

    Jeanne, I wanted to check with you to see how CCCR is working for you. I am very worried to jump to a credit counseling company for fear that they will “hold” my payments until there is enough money in an account to pay something causing my payments to be late, ultimately ruining my credit.

  • Wayne

    Dave Ramsey is the way to go! My wife and I took his course through our church but you can take it online. He’s funny, informative and gets to the point. I like the facts and my wife likes to have fun so his course was perfect. It even helped our marriage. When BOTH husband and wife are cleaning up the debt mess it makes it that much easier however, we did see a lot of single people taking the course too. We started in Oct. 2014 with 48K between all the loans we had together and now our debt free day is September 18th 2015!

    Dave Ramsey’s course is the real-deal, a true blessing from God.

    • Credit Experts

      So glad you have found a debt-reduction strategy that works for you. Thanks for sharing.

  • TheRagingScotsman

    One factor I have not seen mentioned here is what I learned when entering the field of sales. A job is just that; a means to an end. A job produces a predictable income stream, which is why we were taught that j.o.b. = Just Over Broke, or, where most people are comfortable remaining for the majority of their working lives, whether out of habit, fear, or ignorance of what opportunitieseee are available to them.
    The sad fact is that usually only the wealthiest kids are taught good financial practices and habits, so they have advantages throughout their entire working lives. Those of us less fortunate have to figure out (too late – if ever) that creating/establishing multiple streams of income is one of the most certain methods to ensure a better life. Sure, many people think opening a business will make them plenty of money, but the reality is more like plenty of headaches before plenty of money. Many people start a family early in life, and this also can be an obstacle to financial success.
    We are a nation that pays far too much attention to education for the young, but not financial education, just all the subjects one needs to have a well-rounded understanding of the world and our place in it. Why not give our children the financial tools for them to succeed while their minds are most formative, so they can be prepared to be entrepreneurs at an earlier age? This may be the one thing we are missing which could change our entire future as a nation.

  • Vaden

    I had credit card debt and I used Credit Advocates to help with the solution. Now that I am at the end of paying off the debt I just wanted to cry when I saw how much I was charged in fees – it was a fee for everything including phone calls made for me. At least between a forth and half of the monies sent went to them. If I had it to do over again I would call the credit card companies and try to repay the lesser amount over time. It seems to me that the companies that say they can help are only there to take your monies at a very high rate of fees, etc.

  • tasha612

    Portfolio Recovery just got a judgment against me for 10000 – it was a motion for summary judgment and it was pre determined before I got to say mediation was offered…..I am on 100 percent disability and only work about 12 hrs per wk so they cannot touch my earnings either – I am co owner of house in Fl but we have homestead…..I will be 60, husband is 66 — so exactly what do they hope in getting this judgment? The alleged debt was in my name alone..

    • Gerri Detweiler

      Who knows? If the statute of limitations was due to expire they may have been trying to protect their future ability to collect. It’s hard to say.

      • tasha612

        so to ease my stress, which ironically is a major component in my disabiiity, after I fill out their financial affidavit, I am assuming I won’t have to worry about them pounding on my door and taking our furniture? My 2013 tax statement Chase bank had sent me a 1099 C for over 20000 – with that when the acct tallied…..he still came out with an insolvency of over 49000 – this all happened rather fast as was not aware my depression also created a bipolar II disorder which is how I accumulated so much debt in such a short time – termed as “manic sprees” – to think I once was a high risk collector and i heard this term at least 2x a day and did not believe……..what is that they say about what goes around? Statute of Limitations with no signed agreement in Fl is 4 yrs..last time I had paid the “creditor” on this one was Nov 2011 – however I see another sitting in collections from Portfolio that says last py was 3/2011 and another from Unifund where lst pymnt was feb 2011 – statute expired…..would I call Transunion?

        • Gerri Detweiler

          The statute of limitations is different than the length of time an account can be reported. This article explains: Does Your Old Debt Have an Expiration Date? (I think that’s what you are asking.)

          • tasha612

            I know they stay on your report for 7 yrs……….but out of all of them while the others of course are on the report as not paid, they are not listed in a separate section that says “in collecions”……the ones that were on the report under the collecions status concern me because I ws sued on two of them……the small claims Calvary was very nice….after they obtained the judgment, I offered thme 300.00 and hey volantrly dismissed the judgment……….do you know how many points affect a credit score with a judgment? Portfollio will never get dime from me…..I offered them 1500 when a cousin offered me a loan and they scoffed………the only thing I have in the bank is my own money however I took out a collateral loan against its is secured……assuming if Portfolio tried to get it, then the bank has first dibs……….

  • Mike

    Hi Gerri. I’m trying to find a way to consolidate my credit cards. I’ve been denied consolidation loans and balance transfers. MY credit score is 669, but its due to the debt usage. I have an excellent payment history. Them more I search for answers, the more people are trying to sell me a product.. Where can I go for answers?

    • Gerri Detweiler

      Mike – will email you.

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