How to Get Out of Debt in 4 Easy Steps
Paying off large chunks of debt can feel like trying to summit a snowy peak in sandals. The average American household is saddled with over $155,000 of debt, according to CNBC, making the journey to better, debt-free living especially daunting. It’s no surprise that many give up before covering any real ground towards their future financial security.
Knowing how to get help with bills and how to get out of debt can be overwhelming, but we’re here to offer you hope and help you attack your debt head-on. This article outlines different types of debts and multiple strategies and tips for getting out of debt you can use to squash your bills once and for all.
The main types of debt you should know about
From medical emergencies to car wrecks, life can toss plenty of unplanned expenses at us. Below are the most common types of debt.
Credit card debt
Too many people aren’t sure how to get help with credit card debt. Credit card debt can also be some of the toughest to pay down. When paying only the monthly minimum, high-interest rates often add years to payment plans, making it nearly impossible to get out of credit card debt. The average indebted household can speak to this, as their credit card debt is $8,701, according to Credit Summit.
Student loan debt
Discharging student loan debt is nearly impossible for most borrowers. Even after declaring bankruptcy, you are required to prove “undue hardship” to a judge in order to make your student loans disappear.
For more resources on how to get out of student loan debt and paying for school, take a look at these related blog posts:
- Crowdfunding Student Loans to Pay Off Debt
- How to Pay for Medical School Without Living in Debt
- How to Pay for Grad School: Master’s Degree Funding
Medical debt
The truth about medical bankruptcy isn’t pretty. According to a report by the Kaiser Family Foundation, 46% of insured adults struggle to afford their out-of-pocket health care costs. A single accident or illness can leave people looking for financial help for out of pocket medical expenses for years afterward. This can make it extremely difficult to get out of medical debt.
4 steps for making a plan to conquer debt
Every successful goal starts with a plan. Thankfully, there are multiple resources available that show you how to get out of debt and create a budget for the first time. If you’ve ever wondered exactly how to get rid of debt but didn’t know where to start, we have four initial steps to help you get started.
1. Determine how much debt you have
The best way to get out of debt is to compile all of your bills, look at all of your accounts, jot down interest rates, and list everything in a spreadsheet. Knowing the balance amount of how much debt you owe is half the battle.
2. Figure out what you should pay first
It makes sense to start paying the debt with the highest interest rate first. But if this will take you years to do, paying off a smaller debt much faster might give you the motivation to keep going. Try exploring different tools such as a credit card calculator that will tell you how long it will take to pay off your credit cards, like this one from Time. Reducing the sheer number of creditors you owe will make finding help getting out of debt a significantly easier task.
3. Layout your budget and track spending
A good budget is everything when learning how to get out of debt and coming up with extra money. Actually sticking to that budget is even more critical. These finance tips can help:
- Pad your budget to account for extra expenses and things that inevitably crop up during the month.
- Use a budget website or apps like Mint or YNAB to keep you on track.
- Try the debt snowball method. Once you pay off one debt, roll that money over into the next debt you want to pay off.
4. Cut out the extras
It’s easy to forget all the online services you’ve subscribed to, so do a deep dive and unsubscribe from anything that isn’t a necessity. Do you really need to buy Netflix, HBO, or that monthly organic food subscription box? If you cut out these services, you’ll likely find that you’re saving more cash than you realized. Without these extras eating into your budget, you’ll be able to get out of debt fast.
3 debt relief options to explore
Getting out of debt for medical expenses, student loans, or credit cards isn’t always easy, but you don’t have to face your debt alone. Here are three ways to help you find out how to get out of debt fast.
1. Loan consolidation
If you have multiple loans to pay every month and some or all of them have high-interest rates, you might consider looking into loan consolidation. When consolidating loans, a lender issues a single personal loan, typically with lower interest rates. The NerdWallet site offers resources on different loan consolidation options. Be sure to check your new loan policy to make sure your interest rate will remain low and won’t increase over the life of your loan.
2. Credit counseling and debt relief services
If you’re wondering exactly how to get out of debt, credit counseling, and debt relief services might be a good jumping-off point. Just be careful about which credit counseling or debt relief services you use, because not all of them are reputable and they may sell services that put you further into debt. The Federal Trade Commission offers helpful tips to avoid scams so you don’t end up doing business with a company you’d rather avoid.
3. Crowdfunding
People have found that crowdfunding is a fast way to tackle their debt when unexpected circumstances set them back financially. Through GoFundMe, you can easily reach out to friends and family members to get back on your feet and get out of debt. To help you get started, check out these simple fundraising ideas. Once you start the hard work of paying down your debt, you’ll be able to set aside part of your income to start to save money for the future.
Every situation is worthy enough for crowdfunding, and people from around the world use GoFundMe for causes both large and small. It’s important to remember that nearly everyone experiences a time in their life when they have to deal with some kind of financial hardship. Your own experience might serve as a reminder to people that everyone deserves to receive help during tough times.
GoFundMe success stories of people facing debt
These are just a few folks who were able to meet their fundraising goals through GoFundMe when they experienced a financial setback:
HOLDING ON TO MY HOME
Charles experienced a string of unfortunate events after leaving his job due to health issues. He had an incredibly difficult time finding another job, so he decided to complete his B.A. and M.A. as well as some other training courses specific to his career. Unable to make mortgage payments, Charles fell into foreclosure and more credit card debt.
“Hardship is a part of living – we all experience it. I am thankful to those who’ve known my story and have given me support.“
Charles wasn’t sure how to get financial help, but then he discovered GoFundMe. His family and friends rallied around him, donating over $20,000 to help him offset foreclosure costs and get back on his feet.
SECRETS STOLEN TRAILER
The members of San Diego based rock band SECRETS encountered a major setback in their musical career a few years ago. While wrapping up a tour, their trailer containing every piece of their musical equipment was stolen, preventing them from recording their fourth studio album.
“Without you, this band would not be here today.”
To keep their music dreams alive, the band members borrowed money and used their own credit cards—leaving them struggling financially years later. To get back on their feet, the band started a GoFundMe and raised over $5,000.
Feel empowered to tell your story and eliminate your debt
Thousands of people start fundraisers on GoFundMe every single day so they can conquer their debt and the stress that goes along with it. You can find emergency financial assistance, too. If you’re one of the thousands of people who search “how do I get out of debt,” take the next step in your journey. Learn how to get rid of debt and sign up to start fundraising today.