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How to Get Out of Debt

Posted by Emily Herrington on Apr 6, 2021 9:55:10 AM

The prospect of paying off your debt may be quite daunting. Between interest rates, minimum payments, and trying to budget, you are liable to get confused and overwhelmed. Becoming debt-free isn’t easy but it certainly is possible with the right plan that works for you.

Know What You’re Working With

This should be the first step you take in order to determine what strategies you will implement. Make a list of your current debts including all loans, credit cards, and collection accounts. Make note of any relevant information pertaining to them such as the interest rate and monthly payment. Additionally, calculate your net income and all other monthly expenses like groceries, utilities, and entertainment. Finally, subtract your non-debt expenses from your income and compare what is left over to what you owe monthly towards debt. Doing this will tell you if you are currently within the demands of your monthly debt payments and whether or not you need to take more aggressive action in order to make progress. Here's how:


Making the minimum monthly payment is not enough and will ultimately leave you in debt longer. This is because once you have factored in interest charges and fees, it is likely that the majority of that payment is cancelled out and only a small amount is put towards your actual balance. Paying any additional extra amount you can afford will help you avoid paying hundreds or thousands in interest.

Try the “debt snowball method”. Essentially this method involves paying the minimum payment on all of your debts except the least expensive one. You would take any remaining money set away for paying off debt on that particular debt. Once that smallest debt is paid off, again you would take all the money you were putting into the previous debt and put it into the next smallest until all of your debt is paid off. There is a similar method to this which involves paying off the debt with the highest interest rate first, however you may find that this is less motivating.

It can be possible to negotiate the interest rate on your credit cards. If you are in good standing with the issuer, they may be able to lower your interest rate in the short term, and in some cases, permanently. Not only is it free to try this it also will not affect your credit score, so there is no harm in asking. If you are not able to negotiate a lower interest rate with your issuer you may consider a “balance transfer credit card” in which you can put your credit card balances on one card. If you meet the balance transfer card company’s qualifications, you could secure a lower over even zero interest rate. “Debt consolidation loans” also usually offer lower interest rates than credit cards but be sure to do your homework on these companies and choose a reputable one that doesn’t charge outrageous fees.

If you found that you do not have enough money left over to cover your payments after figuring your income minus non-debt expenses, there are ways to get back on top. The “small steps” listed below are a great start, and if followed, you will find them beneficial. However, in some cases you may need to make more aggressive decisions. Trading your new car in for a reliable used car could make hundreds of dollars in monthly payments available to you. Getting a second job or even a “side hustle” is a sure way to increase your cash-flow. Side hustles are usually when someone takes a hobby and turns it into a small business to make some extra cash. If working extra hours is out of the question, ask for a raise. Once again, this is a strategy in which there is no harm in asking and has the potential to improve your situation drastically.

Small Steps to Free-Up More Money for Payments

  • Declutter your home and sell items on OfferUp or Facebook Marketplace.
  • Cut cable and try the much cheaper streaming options.
  • Stop eating out and going to coffee shops for your morning brew. One $5 coffee every day of the week for a month adds up to $100 in lost income.
  • When grocery shopping, make a list and do not stray from it. Coupons could help here and if you can’t stick to a budget once you’re in the store, try grocery pick-up.
  • Switch from movies, bowling, and mini golf to free entertainment, do a little research into free activities offered around your community and do those instead.
  • Try paying for more things with cash. When you can actually see the money leaving your pocket it “clicks” a little more how much you are spending.
  • Destroy your credit cards. There is no way you can get out of debt if you continue the same spending habits.

Account Resolution Team is committed to helping Americans get out of debt. Call 423-586-7613 or visit www.accountresolutionteam.com

Topics: Credit, old debt, debt collections, collection agency, get out of debt, how to get out of debt, student debt, unpaid debt, being debt free