How To Get Out of Debt in 7 Steps

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If you’ve gotten yourself into a financial hole for whatever reason and are looking to get out of debt, it’s important to have a plan.

For example, it’s nearly impossible to get out of debt in a reasonable amount of time if you’re just paying the monthly minimums against what you owe. You have to figure out how to pay more.

Follow This Plan To Get Out of Debt As Quickly as Possible

Team Clark works with people every day to help them get out of debt. Take these steps to start paying down those outstanding balances, and you will soon find yourself on the path to being debt-free.

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  1. Add Up All of Your Debts
  2. Try to Negotiate With Creditors
  3. Look Into Refinancing Debt at a Lower Rate
  4. Add Debt Payoff as a Line in Your Budget
  5. Set a Debt Payoff Goal
  6. Use the Avalanche Method to Start Paying Down Your Debt
  7. Find More Money to Pay Off Debt Faster

1. Add Up All of Your Debts

The first step to tackling your debt is to make sure you know exactly how much you owe. That means you’ll need to make a list of all of your outstanding debts and include:

  • Who the creditor is
  • How much money you owe
  • What the interest rate is
  • What the minimum payment is

You can do this on a piece of paper or in a spreadsheet such as Excel or Google Sheets. The important thing is to get all of the information in one place because you will need it for the next steps. Your list of debts should look something like this:

Debt spreadsheet

2. Try To Negotiate With Creditors

Now that you can see what you’re up against, it’s time to find out if there’s anything you can do about getting some of those interest rates lowered. The average credit card interest rate in December 2022 was 19.59%, so there may or may not be some wiggle room here.

In the example above, you might want to target Credit Card Issuer #3, since that rate is above the average. If you’ve been a good customer and made at least your minimum payments for a period of time, the creditor may be willing to work with you on lowering the rate. It doesn’t hurt to ask!

There is probably not much chance of negotiating your student loan rates but check with your lender to see if you might be able to get a discounted rate for using auto-pay, or consider trying to refinance those loans.

If you’re intimidated by the prospect of trying to negotiate with creditors or refinancing loans, consider contacting the National Foundation for Credit Counseling. The organization will point you in the direction of free or low-cost credit counseling and debt management services in your area.


3. Look Into Refinancing Debt at a Lower Rate

Next, you might try to see if you can refinance at least some of your debt at a lower interest rate. If you have good credit, you may qualify for a credit card that has a low promotional rate on balance transfers for a period of time. In many cases, you can even get 0% interest for up to 15 months and sometimes longer.

The important thing to remember is that you should plan to pay off the new card before the promotional period ends or you could end up paying an even higher interest rate on the balance than you were paying before.

4. Add Debt Payoff as a Line in Your Budget

Now that you’ve done the legwork to make sure you’re paying as little interest as possible on your debt, you’ll want to revisit that list of debts you created in Step 1. If you were able to lower any of your interest rates or take advantage of a balance transfer offer, you’ll want to update your balances, rates and minimum payment information and add any new creditors to make sure your list is accurate.

Once that’s done, you’ll want to make sure that your debt payoff is included as a line item in your family budget. If you don’t have a budget, we have a step-by-step guide to creating one here.

Your budget will show you how much money you have left each month after paying your expenses: You should use at least some of that money to pay down your debt. The worksheet can give you an idea of how long it might take you to pay off your debt at your current rate and how you could shorten that amount of time by cutting some expenses, adding some income, or both.

5. Set a Debt Payoff Goal

Next, you’ll want to set a goal for when you want to pay off your debt. This is a critical step, says money expert Clark Howard, because without a goal there’s no accountability.

“It’s like when someone says, ‘You know, I really should be saving money,’ and they’re guilt-tripping themselves. Let’s say that they make enough money and they should be saving money, but they’re not: They’re not going to change their behavior unless they have a goal. So you have to set a goal.”

Because everyone’s financial journey is different, the key is to be realistic. The last thing you need to do is to set a super-stringent benchmark that proves to be unreasonable.

Use your budget as a guide to how much money you can realistically afford to put toward your debt each month. Then you’re finally ready to move on to Step 6.

6. Use the Avalanche Method To Start Paying Down Your Debt

Now you’ll want to use the “avalanche” method of paying off your debt. You start by focusing on the debt with the highest interest rate and work your way down from there. The key is to make sure you’re always making more than the minimum payment on the debt with the highest interest rate while paying the minimum monthly payments on your other debts.

So, in our example from Step 1, you would attack Credit Card #3 (21.99% interest rate) first, followed by Card #2 (15.99%), and so on.

Debt spreadsheet

While there are other debt payoff methods that we discuss here, Clark strongly prefers using the avalanche method.

“Mathematically, you pay off debt quicker if you do the avalanche method,” he says. “Typically, you’ll reduce the overall interest that you pay by 10% or more by attacking the highest interest rate debt as solidly as you can and then working your way down.”

The calculators at can help you see how much using the avalanche method will save you in the long run. You can also get a sense of the timeline for getting out of debt depending on how much you pay toward that debt each month.

7. Find More Money To Pay Off Debt Faster

Speaking of how much you’re able to pay each month, the number one thing you can do to get out of debt faster is to increase the total amount of money you pay toward that debt each month. You can achieve this in a number of ways:

Remember, every extra dollar that you can pay toward your debt each month shortens the amount of time it will take you to become debt-free!

Final Thought

Once you’ve paid off your high-interest debts, it’s time to start focusing on things like building an emergency fund and saving for your future. Clark says that depending on your general tolerance for debt, any loans that you have (like those for vehicles or your home) that have interest rates at or under around 4% can take a back seat to saving. Of course, you’ll still need to make at least your minimum payments.

If you’re ready to get started on the journey to becoming debt-free, you don’t have to do it alone. Join thousands of people just like you in our Ditch Your Debt Facebook group. There, you’ll find support, ideas, and, most of all, the encouragement you need to help you achieve your goal of eliminating debt once and for all.