How to Get Debt-Free

Young woman paying bills with a credit card
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Getting out of debt can seem impossible. While it's challenging to pay down debt, in most cases, it can be done. Learn more about how to get debt free.

Determine Why You Want to Be Debt Free

Before you set a debt-free goal, take time to understand why you want to get out of debt. What is your motivation? What do you want to accomplish by getting out of debt? Not wanting to owe anyone makes perfect sense, but why don’t you want to owe money to anyone?

Once you’ve come up with your reasons for paying off debt, write them down. “I want to be debt-free because…” or “I want to be debt-free so I can…” Put your list of reasons in a place where you will see it all the time. This will help keep you motivated even when you feel like giving up. It puts your end goal right in front of you.

Review Your Options for Getting out of Debt

When it comes to getting out of debt, the (seemingly) easiest answer is to pay it off. But, you may consider some other options, including:

  • Enrolling in consumer credit counseling: A non-profit credit counseling agency can help you develop a budget and set up a payment plan with your creditors. Counselors offer financial education and ensure that your plan makes sense for your situation. Be sure to check the reputation of any credit counseling agency you're considering.
  • Taking out a debt consolidation loan: With this type of loan, you pay off high-interest debt with a loan that has a lower interest rate. These loans may be personal loans or home equity loans or lines of credit. You can pay off debt more easily with a lower interest rate, but if you use a home equity product, you could lose your home if you stop paying.
  • Filing for bankruptcy: This is a last resort, but it can either wipe out your debt or allow you to make more manageable payments for three to five years, after which your debt is discharged. It's expensive to file for bankruptcy, though, and it impacts your credit for 10 years.

You can also pay off your debt yourself. Figure out how much you can afford to pay on your debt each month. This may require you to scale back in some areas of your life. You may have to work some extra hours or find a way to make money on the side. Any of these options can work; the best way to get out of debt is the one that makes the most sense for you.

Set Realistic Goals

The amount of time it takes you to become debt free is directly related to the amount of money you can put toward your debts. The more you can pay, the sooner you can be out of debt.

Being reasonable is critical, because an unrealistic timeline that’s difficult to meet can kill your debt-free plan, leaving you disappointed and unwilling to try again. For example, an unrealistic goal would be to pay off $15,000 in credit card debt in one year on a $50,000-per-year salary and a $1,100 mortgage. If you can manage to pay $2,700 on your credit card each month, you can make it happen, but you're unlikely to be able to stick to such a strict payoff plan.

A more realistic goal would be to pay off $15,000 in credit card debt in three years by cutting back and making a $500-per-month payment. This is definitely more reachable.

There are many online debt payoff calculators that tell you how much time it will take to pay off your debt based on the amount of money you can afford to pay. Some of them even let you enter several debts. You can also reverse it and figure out what monthly payment it will take to get out of debt within a certain period of time.

You can also use an approach like the debt snowball. With this method, you pay off your debts starting with the one with the lowest balance. You pay extra on the debt with the lowest balance and pay the minimum on your other debts. Once the first one is paid off, you apply what you were paying on that debt to the next-lowest debt.

The debt avalanche is similar to the debt snowball, but you pay off debts in order by interest rate. You pay off the debt with the highest interest rate first, then apply that payment to the debt with the next-highest interest rate.

Make a Commitment

Once you've clarified your goals and decided how you're going to pay off your debt, it's time to commit. Keep track of your progress by using a spreadsheet or a chart, or make use of debt reduction software to create a comprehensive plan. Seeing how far you've come can help motivate you to keep going.

Chances are that you'll have other priorities come up. Weigh these priorities against your desire to be debt free. Some, like a vacation, may be less important than getting out of debt, or you might do a staycation rather than traveling. Others, like an unexpected medical bill, need to be paid. You might need to lower your debt payments temporarily and then get back on track as soon as you can.

Don’t Expect to Be Debt-Free Overnight

Paying off your debt is never as simple as racking it up. There's no simple method for how to get out of debt quickly, and it could take several years to pay off your debt completely. Any extra money you put toward your debt helps though. If you get off-track, regroup and start again the next month. With time, you can be debt free.