How to Get out of Debt: 9 Strategies for Right Now

If you’re currently trying to figure out how to get out of debt, it might be reassuring to know there are several strategies — and not only one — you can use starting right now.
It has probably taken you years to accumulate debt. Whether it’s from student loans, credit cards, car loans, medical bills (or all of the above) you need a plan to tackle this no matter the type of debt.
Debt payoff is not easy, but with these tactics and dedication to work hard, being debt-free will soon be a reality instead of wishful thinking.

The first step in debt payoff

Before you begin any payoff method for debt, there is one essential step in the process. First, you must face reality with the amount of money you owe.
This starts by writing down every debt. Yes, even the personal loan from Grandma she told you not to worry about. If you owe anyone any money, it’s time to write it down along with a few details. Notate the lender, the balance, the interest rate, and the minimum payments required.
If you don’t have the facts in hand, it makes it more difficult for you to make financial decisions. This is a hard step for many, but it’s OK. No matter what the final number says, you are doing something about it by creating a plan to be debt-free.
Now it’s time to own it and put a plan into action.

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#1. Try the debt snowball method

The first method to consider is the popular debt snowball method. This is championed by personal finance experts like Dave Ramsey and provides a way to make an impact on your debt sooner rather than later.
This method means you pay off your smallest debt first, up to the largest one last, no matter if it has a higher or lower interest rate. So your first goal is to pay off the smallest balance with any additional money you earn, while only paying the minimums on your other debts.
Once you pay your smallest balance off first, you roll the money you were paying towards it, plus the minimum payment, into the second one. The idea behind this is you’re instantly motivated by the quick wins.

#2. Or use the debt avalanche method

Another payoff strategy equally as effective is the debt avalanche method. With this tactic, you list your debts in order of highest interest rate first to lowest. You put all money towards paying off your highest interest debt first while paying the minimum monthly payment on the others. Once you’ve paid off the first balance, then you roll the amount of what you were paying plus the minimum amount and start on the second one. This continues until you are debt-free.
Proponents of this strategy show you pay the least amount in credit card interest (or for a loan) over time, since you’re wiping out the high interest rate first. But some find this method discouraging because it can take a while to chip away at the first balance.

#3. Look for balance transfer offers

Another effective strategy specifically for credit card debt is to look for competitive balance transfer offers. Many financial companies offer enticing welcome offers such as 15 months with 0% APR on balance transfer credit cards. You can use this to your advantage and transfer your high-interest rate credit cards to a promotional offer. This allows you to pay big chunks of your debt without paying any additional interest.
Be careful with this strategy though. Most credit card companies also charge a 3% balance transfer fee for these offers. If you are transferring $15,000 of credit card debt, this is $450. Make sure you run the math to confirm it is truly advantageous for you even with the 3% fee.
You don’t want to “trade one debt for another” by only paying the minimum amount either. If you do find a balance transfer offer, your goal should be to have an aggressive repayment plan and pay off the credit card balance before the end of the promotional period. Otherwise, you can get slammed with additional interest charges once your time expires.

#4. Bring in extra money

Sometimes it’s not so much a debt problem as it is an income problem. You simply don’t make enough money to pay all the debt and your bills. Or you want to supercharge your debt payoff and need extra money to do so. No matter what, bringing in additional money is extremely helpful to your efforts.
Taking on a side gig is the new American way. Currently, 45% of Americans claim to have a side gig, with many making over $500 a month. An extra $500 per month can accelerate your debt payoff to months instead of years.
If you’re unsure where to start, think about fun hobbies or interests you have. Could you make a little extra doing something you enjoy? Here are a few ideas to get your brainstorming session moving:
  • Driver for Uber, Lyft, GrubHub, etc.
  • Become an Amazon affiliate
  • Sell items on Amazon or eBay
  • Sell digital products such as ebooks or printables
  • Teach a local class
  • Teach an online course
  • Offer freelance services (graphic design, photography, web design, writing, etc.)
  • Become a virtual assistant
  • Social media management for small businesses
The key to a successful side gig is to make sure it’s something you enjoy and will make money from quickly. Since you will likely be performing this job in addition to your full-time one, you need all the motivation you can get to keep moving.

#5. Build your emergency fund

It may seem counterintuitive to advise you to save money to get out of debt. But creating an emergency fund is one of the first steps to take to stop your perpetual cycle of debt. To break this habit, you need a savings account dedicated solely to emergencies.
We all know emergencies happen at the worst times. We never get to choose the timing so that means we don’t have extra money sitting around ready to handle one. By creating an emergency fund, you stop the debt cycle in its tracks. Instead of charging an unexpected $250 bill to your credit card, you simply reach into your savings account and use it. Of course, you need to replenish it as well, but you won’t be paying extra in credit card interest either.

#6. Learn to love budgeting

Another effective way to attack your debt is to start budgeting. If you’ve never had a budget before, there’s never been a better time to start using one. In today’s digital world, there’s a wide variety of apps ready to keep your money at your fingertips.
Budgeting is like other financial principles - it takes practice and trial and error. The good news is, there are several budgeting methods worth trying. Popular methods include:
  • Zero-sum budgeting
  • The envelope method
  • The Pay Yourself First (or 80/20) method
  • The 50/30/20
  • Reverse budgeting
  • Digital budgeting
The key to budgeting is telling your money where to go. This means you need to understand how it’s currently going out and coming in.
Once you identify your spending and where you can cut, then it’s time to stop the bleeding. Start putting any “extra” money towards your debt while you stop spending on unnecessary items. Even if it’s only $25 extra a month, start there. Budgeting helps you identify these opportunities right in front of you.

#7. Learn to negotiate

Another tactic for slashing debt is to pick up the phone and start negotiating. This is easier than you realize and costs zero dollars. If you have high-interest rate credit cards, try calling the lender to negotiate a lower interest rate. Let them know you have an offer from another credit card company but you want to stick with them.
But don’t stop with your credit cards. Negotiate your bills too. Start comparison shopping with regular monthly bills, such as auto insurance and cable company. Let these companies know you are loyal but would like help on the rate. Before you know it, your bills can be lowered by $100 or $200 a month. Put this money towards your debt and accelerate your debt payoff timeline.

#8. Debt consolidation

When trying to figure out the best plan for getting rid of debt, debt consolidation may sound like a tempting offer, but it’s not as straightforward as it seems.
Debt consolidation refers to combining several unsecured loans, such as credit cards, car loans, and medical bills, into one payment, and one interest rate. The idea behind this is you potentially save money on interest and you have one, simplified monthly payment. Numerous companies are promising to do this for you (for a fee).
Although this is an option, there are dangerous money pitfalls to be aware of if you go this route. First of all, the interest rate you’re quoted is dependent upon your current credit score. If your score has taken a beating then you won’t be approved for a reasonable interest rate.
Secondly, it changes your repayment terms. This means the number of monthly payments stretches out even longer. So suddenly your lower interest rate is negated by the extra money you’re paying on a longer payment term.
Debt consolidation may sound like a quick fix but ends up costing you in the long run with higher interest rates and more monthly payments. You’re better off sticking to a strategy of applying all extra money to your debt and paying it off as quickly as possible.

Consolidation of student loans

When it comes to student loans, consolidation means something different. If you have federal student loans, you’re eligible for a Direct Consolidation Loan. This is the process of combining all your federal student loans into one loan, for the simplicity of one monthly payment. Your interest rate isn’t reduced, instead, it’s based on the weighted average of the loans you’re consolidating.
The benefit to this is only having one payment, instead of several. You’re not likely to save any money in interest. You could also run into an issue where your repayment terms are extended and it takes you longer to pay off the balance.
If you have private student loans, some lenders offer loan consolidation. But the same principles apply so you must evaluate the benefit for your interest rate and term length.

#9. Credit counseling

Let’s say you not only need help with a plan to pay off debt, but you need help to make your monthly obligations and understanding concepts of debt management. This is where credit counseling can provide a benefit.
Credit counseling services are typically run through non-profit organizations and agencies to counsel consumers with money management. The services range from creating a budget for you to helping you read a credit report. The counselors also advise with debt management.
A credit counselor can help you with several of the tactics discussed earlier, such as negotiating your bills and working with your creditors for lower interest rates. Typically, you combine all your debts and make one payment to the credit counselor, who then distributes your money to your creditors.
But you should be aware of potential drawbacks with using a credit counseling service. There are monthly fees involved, some as much as $50 per month. Secondly, it does impact your credit score because your credit utilization number will increase. Lastly, you can’t include student loans in your credit counseling and your auto loans and mortgage payments aren’t included either.

The bottom line

Learning how to get out of debt may seem overwhelming at first, but creating a plan with one (or more) of these strategies will lead to payoff success. No matter which action you take, the key to success is starting right now and tackling your debt one step at a time.

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