How to Get Out of Debt: A Step-by-Step Plan That Works
Short answer: to get out of debt, list every debt with its balance, rate and minimum, stop adding new debt, build a budget that frees up extra money, pay the minimum on everything, and send every spare dollar to one target debt until it is gone, then roll that payment to the next. The two main orders are avalanche (highest interest rate first, which usually costs least) and snowball (smallest balance first, which builds momentum). Pick the one you will stick with.
Key takeaways
- The plan is simple: minimums on everything, all extra money to one target, repeat.
- Avalanche saves the most interest. Snowball gives early wins. The difference is often smaller than people expect.
- Cutting your interest rate, through a balance transfer or consolidation, can help only if the fees and terms do not cancel the saving.
- Free nonprofit credit counseling exists. Be careful with companies that charge up-front fees to "settle" debt.
Step 1: List every debt
Write down each debt's name, balance, interest rate and minimum payment. Include cards, personal loans, car loans, student loans and any medical or family debts. The interest rate decides which debt costs you most, so find it on the statement if you do not know it.
Step 2: Stop adding new debt
Pause new card use and new financing for non-essentials, or you will be filling a bucket with a hole. Keep a small starter emergency fund, even $500 to $1,000, so a surprise expense does not go back on the card. See how many months you need and sinking funds.
Step 3: Find extra money to put toward debt
Build a budget (see how to make a budget), cut what you can, and look at raising income. Add up your minimums, then decide how much extra you can add. Even $100 more a month shortens the time more than you would think.
Step 4: Choose avalanche or snowball
| Avalanche | Snowball | |
|---|---|---|
| Order | Highest interest rate first | Smallest balance first |
| Main benefit | Lowest total interest | Fast wins, which keep many people going |
| Best for | People who are motivated by saving money | People who need visible progress |
Here is a worked example. You owe $13,200 across three debts and can pay $700 a month in total.
| Debt | Balance | Rate | Minimum |
|---|---|---|---|
| Credit card | $3,000 | 24% | $90 |
| Small loan | $1,200 | 8% | $50 |
| Car loan | $9,000 | 7% | $220 |
| Approach | Months to be debt-free | Total interest |
|---|---|---|
| Minimums only ($360 a month) | 56 | $3,418 |
| Snowball (small loan first) | 21 | $1,146 |
| Avalanche (credit card first) | 21 | $1,041 |
Paying $700 instead of the minimums cuts the time from 56 months to 21 and saves more than $2,000 in interest. Avalanche saved $105 more than snowball here, with the same finish date. For a deeper comparison, see avalanche vs snowball.
Step 5: Pay minimums on everything, then attack the target
Set up automatic minimum payments so nothing is ever late, since late fees and penalty rates make debt worse. Then send every extra dollar to your target. When it is paid off, add its whole payment to the next debt. This is the snowball effect, and it applies to both methods.
Step 6: Can you lower your interest rate?
- Balance transfer card. A card with a low or zero introductory rate can cut interest, but check the transfer fee (often a few percent) and the date the promotional rate ends.
- Debt consolidation loan. A single loan at a lower rate than your cards can simplify payments and cut interest. Check fees and the term, because a longer term can cost more overall. See should I consolidate my debts and the loan consolidation report.
- Ask for a lower rate. A call to your card issuer is free, and a record of on-time payments helps.
Whichever you choose, do not run the old cards up again.
When should you get help?
If the minimums are more than you can pay, talk to a nonprofit credit counseling agency. The National Foundation for Credit Counseling lists member agencies, and the Consumer Financial Protection Bureau explains your rights with lenders and debt collectors. Be wary of any company that promises to erase your debt for a large up-front fee, which is a common scam. In severe cases, a bankruptcy attorney can explain your options.
What comes after debt?
Redirect the payments you were making toward your emergency fund and then investing. Your payoff habit becomes your saving habit. See how to start investing, and for student loans specifically, pay off student loans early or invest.
General education, not financial advice. Reviewed October 2026. The example assumes monthly interest at each debt's rate, no new borrowing and a fixed $700 monthly payment.
Frequently asked questions
What is the fastest way to get out of debt?
Pay the minimum on every debt and put all extra money toward one target, then roll that payment to the next debt. In the example above, paying $700 a month instead of the $360 minimums cuts payoff from 56 months to 21.
Should I use the avalanche or snowball method?
Avalanche, which targets the highest interest rate first, usually costs the least. Snowball, which targets the smallest balance first, gives quick wins. Choose the one you will actually stick with, since the difference in cost is often modest.
Should I consolidate my debt?
It can help if the new loan has a lower rate and low fees, and if you do not run up the old cards again. Compare the total cost, including fees and the loan term, before you decide.
Is credit counseling worth it?
Nonprofit credit counseling can help you build a repayment plan, and many agencies offer initial advice for free or at low cost. Avoid companies that charge large up-front fees to settle your debt.
Should I save or pay off debt first?
Keep a small starter emergency fund, such as $500 to $1,000, so surprises do not go back on the card, then put extra money toward expensive debt while capturing any employer retirement match.