How to Get Out of Debt Fast

How to Get Out of Debt Fast
BY Erik J. Martin
Jan 26, 2022
Key Takeaways:
  • People end up with excess unsecured debt when they spend more than they earn.
  • It's important to budget to avoid overspending.
  • Tools like debt acceleration, debt management, debt consolidation, and debt settlement can help you free yourself from expensive debt and save for your future.

Congratulations on finding this page. Life is better when you can live debt-free, so getting out of debt is a good goal. Your answer to the question, “how to get out of debt,” depends on a few things:

  • How good is your credit?

  • What is your income?

  • How much debt do you have?

This article covers which debt solutions work best for different debt problems.

Why It’s Important to Get Out of Debt

Make no mistake: If you are in over your head with outstanding debt, it’s crucial to work hard to pay it down – whether it is credit card, auto loan, student loan, or personal loan debt.

“Debt comes with interest fees, so the longer you have your debt, the more you may pay in total interest, which compounds over time,” cautions Jeff Zhou, a personal finance expert and CEO of Sugar Land, Texas-based Fig Loans. “For instance, if you’re only paying the minimum on your credit card debt, the money you pay only goes toward interest, and the principle remains pretty much the same. It’s like throwing away money. So the sooner you can pay your debt in full, the better.”

Today’s debt harms tomorrow’s future

A huge downside of remaining in debt is that you cannot save for retirement and other life goals.

“Plus, if you have unexpected expenses that arise, like costly medical bills, that could put you at risk for bankruptcy or other dangerous financial situations,” says Mark Chen, founder/CEO of BillSmart in Los Angeles.

Excess debt can lower your credit score

Accumulated debt also affects your credit rating, which can hurt your ability to borrow money in the future. It can also limit your choices of partners, vendors, and landlords and the credit terms they offer.

“Banks, utility companies, and credit card companies routinely update the credit bureaus on your payment activity and outstanding debt. So do many vendors. Some companies belong to industry credit groups where they share even more credit information about their customers to minimize the chance of bad debt. This information provides the basis of your credit reports,” explains Dean Kaplan, president/CEO of The Kaplan Group, a San Luis Obispo, California-headquartered commercial debt collection agency.

Debt and personal happiness don’t mix

What’s more, being in debt can tax your mental health. Per a 2021 Capital One CreditWise survey, 73% of Americans rank their finances as the most significant source of stress in their life.

“When people start to pile up debt month after month, it causes stress and anxiety. If you don’t start paying off your debt, it may not only adversely impact your mental health; you could also end up in a debt collection lawsuit, which is serious, time-consuming, costly, and complex,” Kaplan says.

Pay Off Debt Faster: Snowball and Avalanche

One of the most recommended ways to get free of debt is to accelerate your payments. You can attempt two particular tactics: the debt snowball method or the debt avalanche method.

“With this strategy, you pay more than the minimum payment owed on the account you target. By paying much higher amounts, you’ll be able to clear the outstanding balance faster,” Zhou says.

For the snowball, prioritize paying down the smallest debt first and work your way up to paying off your other debts. The avalanche focuses first on the debt with the highest interest rate. 

You must make minimum payments on all your other debts with either strategy. After your priority debt is paid off, you pay off each additional debt as quickly as possible while making minimum payments on the rest.

Debt Negotiation

Another way to dig out of debt faster is to negotiate with one or more creditors.

“There are several things consumers don’t realize they can negotiate – items in stores, hotel rooms off-season, art, jewelry, etcetera. So why not debt?” asks Kaplan. “For example, if you’re someone with medical debt, you might be unaware that medical bills can be negotiated. Some hospitals have lower prices for uninsured patients. Some offices have payment plans or even fee waivers for qualifying patients.”

Be honest and upfront with these creditors. Simply calling and having a conversation with vendors, such as electric and gas companies or insurance companies you owe money to, can make a big difference in your savings.

“A lot of companies will even allow an increment of time before you pay off the entire amount or readjust your payment amount for a three- to six-month period to give you space in your budget to pay your other debts,” Kaplan continues.

If you have credit card debt and you maintained a good account standing and payment history over a few years, “you have a better chance of getting a lower interest rate,” notes Zhou. “Call your creditor and try to negotiate a new rate.”

Chen says that, in his experience, “you can lower your APR 5%, on average, and get 1.5 months of past interest refunded if you try to negotiate.”

Debt Consolidation

Debt consolidation means paying off several balances with one loan. Look for a loan with a lower interest rate. Debt consolidation does not reduce your loan balances, but you have more money to pay down your balances faster by paying less interest. Understand that debt consolidation loans come with costs.

“Make sure that the money you’ll save on the interest is bigger than the money you’ll spend having the loan consolidated,” recommends Kaplan.

There are different ways to consolidate credit card debt. They include a debt consolidation loan, personal loan, balance transfer credit card, home equity loan or home equity line of credit (HELOC), or even tapping into your 401(k) savings.

“Personal loans typically have lower interest rates than credit cards and are a good way to get a huge sum of money faster. They have fixed monthly payments, which also help you manage your budget better,” says Zhou. “You can use the money to pay for other debts you may have, especially ones with high interest rates.”

Best Debt Solutions for Good Credit

If you have good-to-excellent credit, you have more options for getting out of debt. These options include balance transfer cards and personal loans. Balance transfer cards are generally available only to top applicants, while personal loan interest rates can be too high to be helpful if your credit score is low. 

Get rid of credit card debt with a balance transfer

Balance transfer credit cards allow you to move existing credit card balances to them and pay low or even no interest for up to 24 months. The idea is that your entire payment goes toward reducing your balance so that you can pay it down faster. Balance transfer cards have balance transfer fees that offset some potential savings. When shopping for a balance transfer, compare the length of the low-interest period and the transfer fee to find the best deal. 

Balance transfer cards are best when your debt is small enough that you can pay it off during the low-interest period. If not, personal loans might be a better solution. 

Consolidate debt with a personal loan

If your credit and income are good enough, a personal loan could help you get rid of credit card debt faster. Average personal loan interest rates run about 7% lower than rates for comparable credit cards. Personal loan interest rates are usually fixed, which makes budgeting easier.

Terms range from one year to over ten years. Choose the shortest period you can afford to get out of debt fast and save on interest. 

Best Debt Solutions for Homeowners

If you own a home and have enough home equity, you might clear your credit card debt with a home equity loan or line of credit. To see how much you can borrow, multiply your current property value by .8. Then subtract your current mortgage balance. If your home is worth $300,000, $300,000 * .8 = $240,000. If your mortgage balance is $200,000, you might be able to borrow $40,000 for debt consolidation.

Home equity loan

Home equity loans are fixed-rate products with terms of up to 30 years. You’ll typically pay fees for lender services and title and escrow charges, so home equity loans are best for larger loan amounts.


HELOCs are like credit cards secured by your home. They usually have variable interest rates. You can tap them and repay them again and again, making them suitable for other uses in addition to debt consolidation. However, their variable rates can make budgeting a challenge, and their ease of use can also make it harder to get and stay out of debt.

How to Get Rid of Debt With Bad Credit

If you have poor credit and are in debt, you need to pay down your debt and improve your credit as best you can.

“Request your credit reports and see if there are any errors on them that are hurting your score,” Chen recommends. “You can also subscribe to services like Experian Boost that can use things like your rent payments to improve your credit score a bit. Once your credit is in better shape, you can try to lower your debt through balance transfer cards and lower-interest personal loans.”

Even with a low credit score, you have options. 

401(k) loans to get rid of debt

If you have a 401(k) account at work and your employer allows you to borrow against it, you might use it to pay off credit cards. There are a few advantages:

  • Because you’re borrowing from yourself, your credit rating does not matter.

  • Payments come out of your paycheck.

However, there are drawbacks. As long as you have a loan against your balance, you can’t contribute to your 401(k). That can hurt your retirement. And if you lose your job or change employers, the loan has to be repaid in 60 days, or you incur steep tax penalties. If you take a 401(k) loan, pay it back as quickly as you can.

Getting Rid of Debt With Low Income

If your earnings are lower than average and you’re steeped in debt, take action.

“Try to increase your income so that you’ll have more money to pay your debts faster. You can look for a side hustle or sell items that you no longer use, for instance,” Zhou explains.

There are solutions for people suffering from debt they can’t afford. In order of least to most drastic, consider credit counseling, debt management, debt relief, or bankruptcy.

Credit counseling and debt management plans

Credit counselors can help you with budgeting and finding money for debt repayment. In addition, they offer debt management plans (DMPs). 

“If you realistically have no chance of paying everything you owe, you can try negotiating discounts and viable payment plans by getting the help of a credit counselor,” suggests Kaplan. 

“The National Foundation for Credit Counseling (NFCC) is a nonprofit agency dedicated to improving people’s financial well-being. They can refer you to counselors in your area who can provide financial reviews and help you determine a plan for dealing with your debt.”

Debt management plans consolidate your debt. You make a single payment into the program, and your credit counselor distributes it among your creditors. There is a fee, and you’ll usually have to close your credit cards. That can drop your credit score. Make sure that you can afford the payment of a DMP before committing to it.

Best Solutions for Serious Credit Card Problems

Some people have the deck stacked against them. If you have low income, bad credit, no assets, and creditors breathing down your neck, debt consolidation or a DMP might not be enough. But there is hope even then.

Debt relief 

Debt relief, also referred to as debt settlement or debt adjustment, involves resolving outstanding debt for less than you owe. But the creditor has to agree to this arrangement, which is no sure thing.

You can pursue debt settlement with a creditor yourself or hire a debt settlement company to negotiate for you and help you through the process.

You need a lump sum to offer your creditors to settle your debt. You’d normally get this by borrowing or not paying your credit card balances and putting the money into savings. Once you have enough to offer creditors, you or your debt settlement company contact them and negotiate the settlement amount. 


As a last resort, you can explore bankruptcy. The two most common personal bankruptcy filings are Chapter 7 and Chapter 13. Both are public, and they stay on your credit reports for seven or ten years. 

“If your financial situation is truly untenable, you can file for bankruptcy and discharge your debts.  This will destroy your credit for a couple of years. But if it allows you to put yourself in a better financial situation long term, it might be the right step for you,” advises Chen.

Filing for bankruptcy requires submitting a bankruptcy petition and financial statements demonstrating your debts, income, and assets. Also, you’ll complete a means test form, which determines whether your earnings are low enough for Chapter 7. If they are not, you’ll have to file for Chapter 13 bankruptcy.

With a Chapter 7 bankruptcy, a court-appointed trustee sells your property (except for exempt things like tools for your job) and forwards the proceeds to your creditors. Any unpaid balances are forgiven and discharged. 

With a Chapter 13 bankruptcy, you get to keep your property. You make monthly payments, usually for five years, into a plan, and the court distributes the money among your creditors. The payment amount is set by the court and can be high. After (usually) five years, the remaining balances are forgiven, and the debts are discharged.

Getting Rid of Credit Card Debt Is Possible

As you can see, people in any situation can find a way to get rid of credit card debt. The right solution for you depends on your credit score, income, assets, and determination. The most important thing is to make up your mind and get started now.