How to Get Out of Debt: 7 Easy Steps You Need to Take Today
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 $137,000 of debt, according to USA Today, 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. If you’re asking yourself “how do I get out of debt,” this article will outline different types of debts and multiple strategies and tips for getting out of debt that you can use to squash your bills once and for all.
The main types of debt you should know
From medical emergencies to car wrecks, life can toss plenty of unplanned expenses at us. Below are the most common types of debt people get into when life get unpredictable.
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 debt. The average indebted household can speak to this, as their debt is over $15,000, according to NerdWallet. The most important thing to remember when you’re trying to get out of credit card debt is the interest rate for each of the credit cards you owe on. This will be a vital step in planning your strategy to pay off any credit card debt.
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 student loans and paying for school, take a look at these related blog posts:
- Crowdfunding Your Student Loan Debt
- How to Pay for Medical School Without Going Broke
- How to Pay for Graduate School Without Loans
Medical debt
The truth about medical bankruptcy isn’t pretty. According to a report by the Kaiser Family Foundation, 63% of people with medical insurance said they used up most or all of their savings and retirement to pay for medical bills. A single accident or illness can leave people looking for financial help for out of pocket medical expenses for years afterward. Another thing to keep in mind if you’re trying to get out of medical debt is it’s typically not as urgent as other forms of debt or bills. Unlike other debt, unpaid medical expenses are not as damaging to your credit, so you can plan to pay off other forms of debt first.
7 steps to get out of debt fast
Every successful goal starts with a plan. Thankfully, there are multiple resources, and debt relief options, available that show you how to get out of debt fast 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.
As you do this, remember that each type of debt is unique. For example, if you are trying to get out of student loan debt, but also have credit card debt, it may make more sense to pay off your credit cards first. This is because most student loans will have lower interest rates than credit cards, which tend to have very high interest rates.
2. Lay out 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.
3. 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.
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.
5. 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.
6. 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.
7. 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 and get back on your feet and out of debt. GoFundMe offers fundraising, allowing you to keep more of the funds you raise. 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.
These are just a few folks who were able to meet their fundraising goals through GoFundMe when they experienced a financial setback:
For the Love of Landrey
The first 73 days of Landrey’s life were spent in a hospital on life support. She was the first person in the US to be diagnosed with a rare gene mutation that caused epilepsy, a congenital heart defect, and other life-threatening illnesses. By the age of four, she had experienced 15 hospitalizations. Her parents used every resource they had to pay for her care.
“Thank you for moving a mountain and changing Landrey’s future. We are forever grateful.”
After depleting their savings and accruing $40,000 in credit card debt, Landrey’s parents were in a financial bind. Family members came to the rescue and started a fundraiser on GoFundMe to provide Landrey with the care she needed. Their fundraiser was a great success and brought in over $150,000.
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 about two 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 two 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 fast,” take the next step in your journey. Learn how to get rid of debt and sign up for a fundraiser today.