How to Get Out of Debt, Fast! A Step-by-Step Guide

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How to get out of debt fast
If you know the basics of personal finance, you may already know the most powerful force in the financial universe is compound interest. With compound interest, it’s easier to grow wealthier over time as the interest you earn compounds on itself over and over again. Unfortunately, compound interest can just as easily work against you as…

If you know the basics of personal finance, you may already know the most powerful force in the financial universe is compound interest.

With compound interest, it’s easier to grow wealthier over time as the interest you earn compounds on itself over and over again. Unfortunately, compound interest can just as easily work against you as it can for you.

If you are in debt, this force is working against you.

If you need proof, grab a copy of all your bills and do a quick exercise to see how much interest you are paying on debt.

How to get out of debt fastBasically, lay all of your bills and balances on your kitchen table and tally up the total amount of interest you’re paying on every balance you owe from your credit cards to your car loan and mortgage.

The result will probably shock you and hopefully serve as motivation to learn how to get out of debt once and for all!

Unfortunately, facing a mountain of debt is never an easy task.

It can be confusing to decide where to start and how to reduce your debts – and that’s after you’ve taken the time and built up the courage to figure out how much you owe. Thankfully, there are a lot of great resources to help you make these decisions.

I have a great resource on my site for you to reference on the teachings of Dave Ramsey, who specializes in getting out of debt, staying out of debt, and planning for a prosperous future.

The lessons are about his Baby Steps to Financial Peace. Reading the entire Dave Ramsey’s Baby Steps series is a good place to start to get some great ideas on how to get out of debt and become financially free.

But if you just want to get right to it, you can follow along below.

How to Get Out of Debt, A Practical Guide

The principles which help people get their finances in order and pay down debt are easy in theory but not so simple to master in practice. Like building wealth, it takes time and dedication to pay off debt once and for all.

The basic principles of getting out of debt are:

Now that we know which principles we’ll cover, let’s dive in and learn exactly how to get started and the best first steps to take.

Recognize the Debt Problem

One of the most important aspects of making any lifestyle change is recognizing the need for change.

This is especially true of habits which have become ingrained in our lifestyle.

If you didn’t try the exercise linked in the first few paragraphs, I highly recommend it. Knowing how much interest you are paying will change the way you view debt.

Another powerful exercise is to complete a debt analysis which lists all your creditors, debt balances, interest rates, minimum payments, and how long it will take you to pay off the debt.

Knowing and understanding the details of your debt situation is integral to this process.

How does your debt stack up? Another important factor for you to know and understand is how your family’s debt compares to other families in America.

These articles show the average household debt and average credit card debt in America. Both need to decrease for people to achieve financial security and be able to save for retirement. When you look at the average retirement savings in the US, you can see that as a nation, we have a long way to go.

Check your credit report. In addition to figuring out how your debt stacks up to others, it’s crucial to check your credit report for accuracy.

Not only will doing so let you identify any discrepancies on your credit report, but it will allow you to see if your credit score needs work, too.

Fortunately, you can get a free copy of your credit report from the three credit reporting agencies – Experian, Equifax, and TransUnion – once per year through a website called

In addition, you should also try to get a copy, or at least an estimate, of your credit score.

Fortunately, you can get a free estimate of your credit score easily and quickly by signing up for an account with

Understand your financial situation – start with a budget. The most important step you and your family can take at this point is understanding your financial situation.

Once you have completed the previous exercises I mentioned, you should now have a better grasp on where you stand financially. Now it is time to start up a budget.

My friend Lynnae wrote a great primer about how to build a budget for the first time, and you should absolutely read it. There are many tools you can use to help you make a budget, but if all you have is paper and a pencil, that will work fine.

You just need to do it.

Money Management Tip: Using money management or budgeting software can help you visualize this and make the job easier. You may find the following products helpful for your needs: QuickenYou Need a Budget,, and other free online money management tools.

Commit to Eliminating Debt

More important than recognizing the need for change is actually following through with it.

This commitment can be broken down into two important steps:

  1. Stop using credit.
  2. Start paying down your loans.

Stop using credit. If you’re using credit cards and carrying credit card debt, cut up your cards, freeze them, lock them in a safety deposit box, and be willing to do whatever else it takes to stop spending money you don’t actually have.

It can also help to re-evaluate planned purchases.

For example, if you have a lot of consumer debt and were planning to use a loan for a major purchase, such as a new house or car, consider renting or buying an older model car with cash until you have eliminated your debt.

Get a balance transfer credit card. If you have a lot of debt at high-interest rates, getting a balance transfer credit card might also be ideal.

These cards let you score 0% APR on your balance for anywhere from 12 – 21 months. Some charge a balance transfer fee of 3-5 percent of your balance, but not all balance transfer cards charge this fee.

Either way, imagine how much money you could save if you could avoid paying interest on your credit card balances for nearly two years.

Keep up with your loans. Make sure you are paying at least the minimum payment on all loans so you can avoid being subjected to late fees, penalties, higher interest rates, and possibly a lower credit score.

The ultimate goal is to accelerate debt payments and pay as much as possible above the minimum payment.

While you’re getting started, however, it may be best to focus on being current on all loans.

Reduce your interest rates if you can. You may be able to contact your credit card companies and ask for a reduction in interest rates; some companies are willing to reduce interest rates provided you make on-time payments.

Another option is to do a 0% balance transfer, which we mentioned above.

This option allows you to transfer your credit card debt to a 0% interest credit card, avoiding interest payments for months in the process.

Consider this list of featured balance transfer cards and compare their offers before you sign up.

Cut your daily spending. If you’re spending money you don’t have on credit cards, chances are good you’re not living within your means. In order to get a better handle on your budget, it’s crucial to figure out exactly how much you earn each month and create a spending plan that allows you to spend less than that amount.

If your take-home pay is $3,000 per month, for example, you could keep your spending below $2,500 so you can set aside money for savings and emergencies.

To cut your daily spending, look for ways to reduce your monthly bills. Consider cutting cable television or downgrading your cell phone plan, for example.

If you’re spending a lot on food or dining out, you can also strive to cook most of your meals at home.

Get Support, and Get Your Family on Board!

Making big lifestyle changes can be difficult for one person. For this reason, it’s a good idea to get an accountability partner or someone you can check in with if you’re not paying down debt as a family. The moral support you receive from a trusted friend can go a long way toward keeping you on the right path.

On the flip side, paying down debt can be isolating and boring if you don’t have anyone to share the journey with.

On that same note, it’s essential that your family is on board if you have one. What is difficult for one person can be impossible if someone is working against you, specifically a spouse or life partner.

Having your family working with you can make it easier to set and keep expectations, avoid excessive spending, and make progress.

You can even use this as an opportunity to get your family involved by finding creative ways to cut expenses, earn a side income, or hold a garage sale to raise funds that can be used to pay off debt.

With your family on your side and dedicated to the cause, you can work together to achieve your joint goals.

Establish an Emergency Fund

What does saving money have to do with paying off debt? 


An emergency fund is an essential part of the commitment to no longer using credit because it gives you a cash to cover unexpected expenses. Using your emergency fund instead of credit cards or other loans will help you get out of debt more quickly.

It is a good idea to keep your emergency fund in an online savings account where you can receive high-interest rates and maintain access to your money.

If you’re worried how you’ll build up an emergency fund when you can barely keep up with your bills, keep in mind it gets easier with time.

If you’re able to cut your spending, you’ll find you have more cash to save and pay down debt every month, for example.

And, as you pay off old balances and work toward debt freedom, you’ll have even more cash to spend or save.

The first step you should take is to figure out how much you might be able to save every month as you ramp up your debt repayment efforts.

Maybe you can only save $50 or $100 per month at first, and that’s okay. If you could set aside even $100 per month for an entire year, you would have a small nest egg of $1,200 saved up after 12 months.

While that amount of cash may not save you in an emergency, it’s a good place to start and it’s certainly better than saving nothing.

In the meantime, you should also make sure you’re saving your money in the right place. Ideally, you’ll want to save your emergency fund in a savings account with a high interest rate.

However, you may also want to look for savings accounts which offer a signup bonus.

The more you can get your savings working for you, the better off you’ll be.

Accelerate Debt Payments

This is the step where we really start to gain ground on your debt elimination.

Paying extra on your loans can help you save hundreds or even thousands of dollars compared to making minimum payments.

In fact, the new credit card rules stipulate credit card companies must disclose how long it will take to pay off your loans with minimum payments and what your payments should be to pay off credit card debt in 3 years.

Highest Interest Rate vs. Lowest Balance. There are two schools of thought regarding which debt to pay first, the highest interest rates or the smallest balance.

  1. Paying extra on the debt with the highest interest rate will save you the most money in the long run, but it may take longer to notice a difference when you are making multiple payments each month.
  2. Making additional payments on the loan with the lowest balance gives a psychological boost because you eliminate a credit card loan or other debt more quickly using this method.

Both methods are successful, so use the method that you prefer.

Snowball your debt payments. The debt snowball is a debt reduction method popularized by Dave Ramsey. Simply stated: Pay extra on your loans and when you eliminate one loan, add the amount you were paying to the next loan on your list and repeat.

In this method, your payments “snowball” and you will eliminate your loans more quickly.

Pick up a side hustle. If you’re trying to pay down debt with a limited income, finding a way to earn more cash is one of the best moves you can make.

Fortunately, an array of new technologies have made it easier than ever to earn money in your spare time without a huge commitment.

If you have a nicer and newer car, for example, you could earn extra money driving for Uber or Lyft or delivering groceries with Instacart.

If you have plenty of spare time in the evenings but can’t really leave your home, on the other hand, it’s possible to earn several hundred dollars in extra cash each month completing surveys online.

You can also make it a hobby to open bank accounts for sign up bonuses. Many people are able to make an extra couple hundred dollars per month by opening new accounts.

Last but not least, you could always look for a side gig walking dogs or doing basic yard work.

The best side hustle for you depends on your skill set and the amount of time you have to devote, but there are plenty of options to choose from.

Advanced Debt Reduction Strategies

As you repay your loans and start tackling your balances, you will probably notice your credit score improves because you are making regular, on-time payments and your credit utilization decreases.

This is great news because it lets you know you are making positive changes to your financial health.

However, it may also help you as you seek to pay down debt faster.

As you push through the final phase of your debt payoff strategy, consider these tips which can help you pay down debt at lightning fast speed.

Pick up a balance transfer credit card. If you have a good credit score, you can probably qualify for a 0% balance transfer card which allows you to transfer credit card debt to a 0% APR credit card.

This is an advanced debt reduction strategy because it requires opening a new credit card.

This should only be used if you are committed to getting out of debt and will not use the credit card for new purchases!

At this point, you may be wondering how a 0% APR card could possibly make such a huge difference. Let’s look at an example:

For a moment, imagine you have $15,000 in credit card debt with an average APR of 18 percent.

If you made a minimum payment of 3 percent, or $450, it would take you 47 months (almost four years) to pay off your balance.

During this time, you would also make $5,950.81 in interest payments alone!

Now, let’s imagine you transferred your balances to a balance transfer card which offered 0% APR for 21 months.

First off, you would need to pay a balance transfer fee of $450, or 3 percent, upfront. This brings your total balance to $15,450, which you could pay off without interest for 21 months in a row.

If you paid the same $450 per month, you would pay off $9,450 in debt over 21 months. At this point, you would have a remaining balance of $6,000, which you could pay off at a higher interest rate, or transfer to another 0% APR credit card.

If you were able to pay $735 per month for 21 months, on the other hand, you would become entirely debt-free without paying a dime in interest payments over 21 months.

Also, keep in mind not all balance transfers charge a balance transfer fee!

There are a handful which don’t charge this fee, although they typically only offer 0% APR for 15 months at most.

Either way, you should explore this list of featured balance transfer cards to find the right option for you and the amount of debt you have.

Sign up for debt consolidation. Another advanced debt reduction strategy is a do it yourself debt consolidation plan, which can reduce your interest rates and simplify the repayment process.

With debt consolidation, you usually consolidate all your debts in one place with either a balance transfer card or a personal loan.

With either option, having only one payment to make can simplify your finances and take a lot of stress out of the equation.

Consider debt settlement or a debt management plan. According to the Federal Trade Commission (FTC), debt settlement and debt management are additional options you can consider.

With debt settlement, a third-party company will call your creditors on your behalf and attempt to settle your debts for less than what you owe.

In the meantime, you’ll start saving up for debt settlement in a special savings account earmarked to pay off your settled debts.

With a debt management plan, you’ll work with a credit counselor to pay down debt faster.

Not only will they call your creditors and try to negotiate down your interest rates on your behalf, but they’ll even pay bills out of an account you set up with the credit counseling organization. These firms promise to save you money and help you avoid fees, but they aren’t risk-free.

The FTC notes you should be aware of the risks of both debt settlement and debt management plans before you sign up.

All in all, getting out of debt will not only free up money for you on a monthly basis but not having the burden of debt collectors and high-interest rates will make your life much easier.

So, get started today on eliminating that burden in your life and live the life you were meant to live.

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. James Mason says

    Try the accelerated payment plan…start off with whatever that you can afford monthly that can be considered as “extra”. add this amount to your min. payment on the lowest balance card monthly; once its paid, take this payment along with that card’s minimum payment and pay the next card off. before you know it if you’re like me, you’ll be paying a couple thousand monthly on your larger balances, like that mortgage payment etc. its working for me and in about 5 years the only debt that I’ll have are the ones yhat you can never pay off, i.e. phone, cable, utilities, etc. good luck!

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