How to Get Out of Debt Fast in 2024 (7 Steps to Financial Freedom)
Get out of debt fast using the avalanche or snowball method. Plus, save 58% by consolidating your debts, get grants to help you get out of debt, and pay above the minimum. See below how you can save $1,380 in one year by switching car insurance providers and how a higher credit score can lower your rates by 52%.
Schimri Yoyo
Licensed Agent & Financial Advisor
Schimri Yoyo is a financial advisor with active life and health insurance licenses in seven states and over 20 years of experience. During his career, he has held roles at Foresters Financial, Strayer University, Minnesota Life, Securian Financial Services, Delaware Valley Advisors, Bridgemark Wealth Management, and Fidelity. Schimri is an educator eager to assist individuals and families in ...
Licensed Agent & Financial Advisor
UPDATED: Sep 19, 2024
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.
UPDATED: Sep 19, 2024
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
On This Page
If you’re overwhelmed by student loans, credit cards, or medical bills, you can get out of debt fast using proven strategies, such as the debt avalanche or snowball method, and even looking into debt consolidation.
The debt avalanche method targets high-interest balances first, saving you money in the long run. However, if you’re trying to figure out how to get out of debt on a low income, the snowball method clears smaller debts first, helping lower overall payments quicker.
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You may wonder, “I am in debt and have no money. What can I do?” We’ll give you tips on eliminating debt and learn how to get out of credit card debt quickly.
Keep reading for offers from some of the best debt relief and loan companies in the nation.
Step #1 – Use the Debt Avalanche or Snowball Method
For those wondering how to get out of debt quickly, it’s critical to create and stick with a repayment plan. We recommend you use the debt avalanche or the debt snowball method, but the strategy you pick depends on your financial goals and preferences.
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We’ll explain more about the difference between the debt avalanche and snowball methods below.
Use the Debt Avalanche to Save up to $12K in Interest!
The debt avalanche method targets high-interest balances first with extra payments beyond the minimum, while paying only minimum payments for other debts. With this strategy, you pay significantly less in interest throughout the life of the debt. Once you’ve paid the highest one off, begin payments on the next highest.
According to research from Fidelity Investments, using the debt avalanche method could save you $12,000 in interest payments and allow you to pay off your debt three years early.
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While you may not eliminate the number of payments as fast as you would with the debt snowball method, it saves you more over time by eliminating cards with higher APRs. This method is great for those with high-interest cards looking to minimize interest costs, but you must be patient as there are fewer milestones to remain motivated.
Pay Debt off 15% Faster With the Snowball Method!
Alternatively, the debt snowball method focuses on smaller debts first to reduce the number of monthly payments, making it great if you want to figure out how to get out of debt fast with no money.
After you pay off the smallest debt, simply move on to the next smallest. The snowball method is ideal if you need motivation boosts to continue eliminating debt and have several manageable small debts.
Research from Oxford University’s Journal of Consumer Research found that consumers who focused on smaller balances through the snowball method paid off balances 15% faster than those who made equal payments to all accounts.
You can still explore top debt relief offers instantly from multiple lenders, helping you find a tailored solution to fit your financial needs.
So while this method might cost you more in the long run, it’s a good option to quickly decrease your debt.
Step #2 – Consolidate Debt to Save up to 58%
Debt consolidation involves taking multiple debts and combining them into one balance with a single monthly payment. For instance, you could apply for a personal loan with a lower interest rate or transfer your balances to a credit card with 0% APR.
Consolidating debt allows you to merge your debt payments into one, which helps simplify payments and reach your goal of debt elimination.
Unlock financial freedom by comparing the best same day personal loans from top lenders and take the first step toward getting rid of your debt faster.
However, it’s critical to always review the terms of any agreement before deciding on a strategy to get rid of debt.
Debt Consolidation Loan
One option for debt consolidation if you have good credit is to get a personal loan. Often, you can find loans with lower interest rates than your debts have.
According to a study from TransUnion, consumers who enroll in a debt consolidation program pay down a little over 58% of their total debt on average with the new loan. Always compare your personal loan options from various lenders to find the best terms for your situation.
Get a 0% APR Balance Transfer Card
Another way to merge your debt and reduce interest is by applying for a balance transfer credit card. Often, these cards offer a 0% introductory APR, which generally lasts anywhere from 12 to 18 months.
Laura D. Adams Insurance & Finance Analyst
However, many balance transfer cards have fees, so consider these costs too. You should also ensure your plan is set up to pay off the full balance before your introductory 0% offer ends to avoid paying interest.
Step #3 – Pay Above the Minimum on Credit Cards and Loans
If you’re wondering how to get out of CC debt, the best way is by paying more than the minimum amount to avoid more interest on your principal balance.
Paying just the minimum amount on your credit card can leave you in debt for much longer due to the interest.
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However, paying above the minimum significantly speeds up your repayment. Paying a higher amount than the minimum shortens your repayment period and reduces the total interest paid. If your minimum payment is $75 and you paid $150 instead, your $5,000 balance would be paid off by the 54th month.
Step #4 – Refinance Your Debt to Save up to $2,700 a Year
Many lenders and banks allow you to move an existing loan balance from one carrier to another with better terms, such as lower interest or a shorter loan period. Often, this is a popular method for people with mortgages and student loans looking to streamline and decrease their payments.
According to a 2021 study from Freddie Mac Economic and Housing Research, borrowers who refinanced their home mortgages reduced their interest rates by 1.15% on average, saving them over $2,700 annually.
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Alternatively, a graduate with a 7% interest rate on their student loan could refinance at 4%, lowering their monthly payments and saving them on interest payments. However, if you have federal student loans, be cautious when refinancing, as you could lose federal benefits if you swap to a private lender.
Step #5 – Negotiate With Creditors
Sometimes, you can negotiate with creditors for better terms, such as lower interest rates, reduced balance, or a better payment plan. All you need to do is contact your creditor and ask them if they can help out.
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Most creditors will work with you, since doing so means they can get their money. For instance, when you can’t make payments on your small business loan, you could negotiate a settlement with your lender. You could ask for a lower rate or reduced monthly payments if you’re having trouble paying credit card bills.
Step #6 – Create and Monitor a Budget
One of the most crucial steps to follow for those wondering how to get out of debt with no money is to create a budget. Track your monthly income and expenses to see where your money goes and find areas where you can cut back, such as dining and entertainment.
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Look for resources such as budgeting tools and apps to make managing your finances simple. Having the ability to monitor your spending habits at your fingertips helps you make better decisions and find ways to become debt-free.
Step #7 – Find a Cheaper Insurance Company
Whether it’s auto, home, health, renters, or business insurance, we recommend you shop around and get quotes with various insurers to see if you can find lower premiums elsewhere.
You can also earn a bundling discount from most top providers if you carry more than one insurance type from the same company, such as auto and home insurance. Save money instantly by comparing car insurance quotes online in your area.
Save $1,380 a Year by Switching Car Insurance Providers!
You’ll always need car insurance, as most states require liability insurance, so looking around for cheaper rates from the best auto insurance companies in your area is a great way to free up more income to pay down debts.
In addition, some providers offer ways for drivers to get low cost car insurance with driver discounts and telematics insurance coverage. You may also no longer need full coverage auto insurance if your car is older, meaning you could save significantly by getting a liability-only policy.
Curious how much you’d pay for auto insurance? Check out the table below to compare rates by coverage level from the top providers:
Auto Insurance Monthly Rates by Coverage Level & ProviderInsurance Company | Minimum Coverage | Full Coverage |
---|---|---|
Allstate | $61 | $160 |
American Family | $44 | $117 |
Farmers | $53 | $139 |
Geico | $30 | $80 |
Liberty Mutual | $68 | $174 |
Progressive | $39 | $105 |
State Farm | $33 | $86 |
Travelers | $37 | $99 |
USAA | $22 | $59 |
U.S. Average | $45 | $119 |
As you can see, USAA offers the most affordable minimum coverage rates, starting at $22 monthly. However, only military members and their families qualify for coverage. So, the next cheapest providers for all drivers is Geico and State Farm, with minimum coverage rates of $30 and $33, respectively.
Drivers who switch from a Liberty Mutual full coverage policy to one with USAA could save up to $115 monthly on their premiums, or $1,380 yearly. You could also earn additional savings if you qualify for USAA multi-car or bundling discounts.
Negative Impacts of Debt
Carrying a high amount of any sort of debt, whether credit cards or student loans, has a lot of negative impacts, including:
- Difficult to Get New Loans: Having high credit utilization is bad for your credit score, and having poor credit may disqualify you from getting loans, credit cards, or mortgages.
- Limited Financial Freedom: Since more of your income goes to covering credit card payments, you have less money for other things, such as basic needs, saving, or investing.
- Financial Stress: Higher levels of debt can cause increase anxiety and stress due to worrying about ability to make payments and future financial stability.
- Employment Challenges: Some employers perform background checks as part of the hiring process and may choose not to hire you based on high debt levels.
As shown, there are many reasons it’s critical to get out of debt fast and lower your debt burden. For example, owing the IRS back taxes can lead to serious penalties, such as wage garnishment and property liens.
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Even if you qualify for debt consolidation, low-credit consumers will likely see much higher interest rates, leading to extra loan expenses.
Most lenders consider credit scores below 580 to be poor, while a score of 670 or higher is good.
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Generally, you’ll see significantly cheaper auto insurance rates if you have a high credit score, as insurers believe you’re low risk and can responsibly pay premiums on time. See how much you can save with better credit with the top providers:
Full Coverage Auto Insurance Monthly Rates by Credit ScoreInsurance Company | Poor Credit | Fair Credit | Good Credit |
---|---|---|---|
Allstate | $296 | $197 | $176 |
American Family | $203 | $136 | $116 |
Farmers | $269 | $160 | $140 |
Geico | $240 | $155 | $125 |
Liberty Mutual | $355 | $226 | $177 |
Nationwide | $250 | $162 | $142 |
Progressive | $270 | $170 | $130 |
State Farm | $220 | $145 | $115 |
Travelers | $265 | $165 | $135 |
U.S. Average | $226 | $148 | $123 |
The cheapest provider for drivers with good credit is State Farm, while drivers with poor credit get the best deal with American Family.
Also, improving your credit score with an existing provider can save you more than double on your rates. For instance, a driver with Progressive who’s credit score improves from poor to good sees a 52% reduction in their rates, falling from $270 to $130 per month.
To get started on finding cheap insurance, simply enter your ZIP code into our free quote tool to see how much bundling your auto and renters could save you from the top providers.
Average Debt Amount by Generation
You might wonder what your generation’s average debt burden is and how it compares to others. Check out the table below to see the average total debt amount by generation, including credit cards, mortgages, auto loans, and more:
Debt Comparison by GenerationGeneration | Total Debt |
---|---|
Generation Z (1997-2012) | $25,000 |
Millennials (1981-1996) | $45,000 |
Generation X (1965-1980) | $70,000 |
Baby Boomers (1946-1964) | $50,000 |
Silent Generation (1928-1945) | $30,000 |
As you can see, the generation that carries the most amount of debt is Generation X, with an average of $70,000 per person, while millennials carry around $35,000.
Learn How to Get Out of Debt Quickly
Knowing how to get out of debt when you are broke is critical to financial stability: use the debt snowball or avalanche method to lower your debt fast.
You could also consider other alternatives such as refinancing or debt consolidation if you find an offer with a lower interest rate and better terms.
Frequently Asked Questions
How can I get out of debt ASAP?
The quickest and most effective ways to get out of debt is to use the debt snowball or avalanche method, where you focus most payments on high-interest or low-balance loans while paying all other minimum payments. You should also create a budget and consider consolidating or refinancing loans such as student loans or mortgages.
Can a home equity line of credit (HELOC) help me get out of debt faster?
Yes, you can use a home equity line of credit, or HELOC, to consolidate high-interest loans into one with lower rates to reduce your monthly payments.
Ready to pay off your debt fast? Explore debt relief programs to get the personalized support you need to eliminate your debt ASAP.
How can I settle my debt without paying the full amount?
Call your creditor and negotiate with them on a lump sum payment to settle your debt for less than the full amount. However, debt settlement options could negatively impact credit score, and forgiven debt can sometimes be considered taxable income. Consider your options and tax laws carefully before deciding.
How can I pay off my debt if I don’t have enough money?
A top question readers ask is, “How do I pay off debt if I live paycheck to paycheck?” If you’re curious what to do if you’re broke and in debt, consider scaling back unnecessary expenses in your budget, looking for additional income sources, and asking your creditors to settle debt.
How long will it take to pay off $20,000 in credit card debt?
How long it takes to pay off $20,000 in credit card debt depends on your monthly payments, interest rate, and financial situation. However, assuming a $500 monthly payment with an 18% APR, it would take a little over five years to pay it off.
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Are there any legit debt relief programs?
Yes, there are many reputable places to get debt relief, such as credit counseling agencies. Ensure you only pick organizations accredited by third parties such as the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA).
Will credit card companies forgive debt?
Yes, many credit card companies will forgive a portion of your debt through a settlement, but you must negotiate the terms with them.
How do I stop paying credit cards legally?
Declaring bankruptcy and settling your debts are the only ways to stop paying credit card balances legally.
Is the government helping with credit card debt?
While the government doesn’t offer assistance with paying credit card debt, some agencies through the U.S. Department of Justice offer resources to protect consumers against unfair debt collection practices.
How can I be debt-free in six months?
If you’re wondering how to be debt-free in six months, make a budget with scaled-back expenses, consider additional sources of income, and pay off high-interest debts through the avalanche method.
How do I get out of debt with bad credit?
Many readers have been asking how to get out of debt with bad credit. Establish a strict budget, minimize expenses, increase your income, and look for a credit counseling agency to help you with a plan.
Compare HELOC loan offers from top-rated home equity lenders to reduce debt now.
However, even with bad credit, refinancing your mortgage could lower your payments and free up cash, making it important to consider all options.
Schimri Yoyo
Licensed Agent & Financial Advisor
Schimri Yoyo is a financial advisor with active life and health insurance licenses in seven states and over 20 years of experience. During his career, he has held roles at Foresters Financial, Strayer University, Minnesota Life, Securian Financial Services, Delaware Valley Advisors, Bridgemark Wealth Management, and Fidelity. Schimri is an educator eager to assist individuals and families in ...
Licensed Agent & Financial Advisor
Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.