7 Practical Ways to Get Out of Debt and Regain Control

Credit card bills have a way of piling up. A few unexpected expenses, a stretch of higher living costs or a temporary loss of income can leave households juggling multiple payments while interest charges eat away at their budgets.

A recent survey by Achieve shows that 43% of survey respondents say they have felt hopeless about their financial situation due to debt. Getting out of debt can be harder than getting into it. When much of your monthly payment goes toward interest instead of reducing what you owe, even people who have cut their spending can struggle to make progress.

Fortunately, there are ways to take control of debt without resorting to drastic measures. From choosing the right repayment strategy to consolidating balances or getting professional help, these seven approaches can make debt more manageable and potentially save thousands of dollars in interest.

Know what you owe

The starting point for any debt repayment plan is a complete inventory of your outstanding debts. A bunch of papers on your desk won’t do it, however; first, set up a spreadsheet that compiles your credit card statements, personal loan documents, medical bills and other debts.

For each account, record the outstanding balance, annual percentage rate (APR), minimum monthly payment and payment due date. The APR is a key metric because it measures your annual cost of borrowing and helps identify what debts are costing you the most.

The Consumer Financial Protection Bureau (CFPB) recommends using a debt reduction worksheet and bill calendar to organize payments and develop a repayment strategy. Having everything in one place also makes it easier to identify bills that might otherwise be overlooked.

Once you have a single source of truth for your budget, it’s time to calculate how much money remains after you have paid for housing, food, transportation and other necessary expenses. That figure determines how much you can realistically put toward debt repayment beyond the required minimum payments.

Missing a minimum payment can trigger late fees, damage your credit history and potentially cause your interest rate to increase. Keeping every account current should take priority over accelerating payments on any single debt. 

Pick a repayment strategy: Debt snowball

The debt snowball method is a debt repayment strategy popularized by Dave Ramsey that focuses on paying off your smallest balances first, regardless of their interest rates. The goal is to eliminate individual debts quickly and build your confidence as you see the number of your outstanding accounts shrink.

Using the debt snowball, you make the minimum required payment on every account, then direct any additional money toward the debt with the smallest balance. When that debt is eliminated, apply the money you were paying toward it to the next-smallest balance.

Suppose you owe $500 on one credit card, $2,000 on another and $7,000 on a third. Under the snowball method, you would attack the $500 balance first, even if the larger debts carry higher interest rates.

The advantage of this approach is psychological. Eliminating a debt account is like tidying your house: Once you see how much better it looks with one clean room, you feel motivated to tackle more difficult projects.

The downside of this approach is that it’s more expensive in the long run. For borrowers who care more about minimizing interest than celebrating quick victories, the debt avalanche method offers a different approach.

Another repayment strategy: Debt avalanche

Rather than ranking debts by balance, the avalanche method prioritizes the account with the highest interest charges (APR). You continue making minimum payments on all other debts while directing extra money toward the most expensive one.

For example, imagine you have three credit cards carrying interest rates of 29%, 24% and 18%. Under the avalanche method, you would pay down the card charging 29% first, regardless of its balance. Once that account is paid off, the additional payments move to the card charging 24%, followed by the card charging 18%.

The math favors this strategy. By reducing the highest-interest balance first, you are reducing the amount of money you will have to pay in the future, assuming your make the same total monthly payments and don’t add new debt.

This approach requires patience. A borrower with a large, high-interest balance might spend months making payments without eliminating a single account.

What can you do when your debt is more than you can pay?

The Achieve survey shows that a full third of respondents don’t know where to turn to reduce their debt. In these cases, taking control of your finances may not be enough. For example, if your household has experienced a recent reduction in income — especially in the face of rising prices — it may not be possible to put extra money toward paying down debts.

For these households, more involved measures may be necessary. Respondents said consolidating multiple debts with a single personal loan was on the table (48%), followed by working with a debt relief company that negotiates settlements on your behalf (44%), enrolling in a debt management plan via credit counseling (40%) and in the worst case scenario, filing for bankruptcy (21%).

Balance transfer cards

Balance transfer credit cards can provide temporary relief by allowing qualified borrowers to move existing credit card debt onto a new card offering an introductory 0% APR.

Some promotions last 12 months or longer, giving borrowers time to reduce their balances without accumulating additional interest on the transferred amount, but transferring debt isn’t necessarily free. Many balance transfer cards charge an upfront fee, often around 3% to 5% of the amount transferred, even when the promotional interest rate is zero.

However, any balance remaining after the promotional period generally becomes subject to the card’s regular interest rate, and missing payments can also jeopardize promotional terms. Before you sign up for a balance transfer, review the transfer fee, promotional expiration date, purchase APR and minimum payment requirements.

Consolidation loans

A personal loan offers another way to consolidate expensive credit card debt.

With debt consolidation, a borrower takes out a new loan and uses the proceeds to repay several existing obligations. Instead of managing multiple credit card payments, the borrower makes one monthly payment on the new loan.

Many personal loans have fixed interest rates and repayment schedules. Unlike revolving credit cards, which allow balances to rise and fall as borrowers make purchases and payments, installment loans have scheduled repayment terms.

This can make budgeting easier because borrowers know how much they owe each month and when the loan is scheduled to be paid off.

A consolidation loan may also save money if its APR is lower than the rates on the debts being replaced. However, a lower monthly payment may simply reflect a longer repayment term rather than a reduction in borrowing costs. Here is the comparison table for a $10,000 loan at a 12% fixed annual interest rate:

Equally important, consolidation doesn’t eliminate the underlying cause of debt. Someone who pays off credit cards with a personal loan and then starts charging new purchases could end up owing more than before.

Credit counseling

For people who cannot manage their debts independently, nonprofit credit counseling organizations offer another route. Certified credit counselors can review a household’s income, expenses and debts, help develop a budget and evaluate repayment options. Some organizations also administer debt management plans, which establish a structured payment arrangement between borrowers and participating creditors.

Under these plans, the borrower generally makes one monthly payment to the counseling agency. The agency then distributes the money to creditors according to the agreed repayment schedule. Creditors may agree to reduce interest rates, waive certain fees or adjust repayment terms. These concessions can make monthly payments more affordable and help borrowers repay outstanding balances.

Debt management plans may also involve setup or monthly fees. Borrowers should ask whether their creditors participate, whether accounts must be closed and how long repayment is expected to take. The Federal Trade Commission recommends choosing organizations with counselors certified by an outside organization and obtaining written information about fees and services before signing an agreement.

Debt settlement

Borrowers should also understand the difference between nonprofit credit counseling and for-profit debt settlement. While credit counseling can help reduce interest rates and adjusting repayment terms, debt settlement companies generally offer to negotiate with creditors to reduce the principal amount owed, allowing consumers to potentially resolve their debts for less than the full balance.While this comes often in exchange for fees, a debt settlement company can only collect fees after successfully negotiating a settlement, the consumer has agreed to it and at least one payment has been made toward that settlement.

Unlike a debt management plan, which seeks to establish affordable repayment terms, settlement attempts to persuade creditors to forgive part of the outstanding balance. During a debt settlement program, consumers typically set aside funds in a dedicated account, which are used to pay settlements as they’re negotiated and approved.

This approach carries risks, however. According to the CFPB, stopping payments can result in additional interest charges, late fees, temporary credit impacts and collection lawsuits. Creditors are not obligated to negotiate with settlement companies, and there is no guarantee that a proposed settlement will succeed. Forgiven debt can also create a tax liability, depending on the borrower’s circumstances and applicable exclusions.

Before paying a settlement company, borrowers can contact their creditors directly to ask about hardship programs, reduced interest rates or alternative payment arrangements. Creditors may be willing to negotiate without involving a third party.

And when debt has become impossible to repay, consulting a qualified debt relief professional or bankruptcy attorney may be more appropriate than spending money on a settlement program to better understand their options and determine which approach fits their financial circumstances.

The most important distinction is whether a proposed solution actually reduces the cost of repayment or merely creates another expense. Borrowers should insist on written terms, calculate the total cost and understand the consequences for their credit before agreeing to any debt relief arrangement.