How to Get Out of Debt Fast: The Best Debt Pay Off Plan

Debt for most of us is a normal fact of life. If you are not in debt now, you probably will be at some time. Before you can get out of debt, you must understand how debt is created and what it takes to get it under control. Most people are clueless as to how their debt got out of control. And once in the cycle of debt, getting out can seem impossible.

According to NerdWallet and Forbes, the average household credit card debt in the US ranges around $15,762.00 – $16,048.00. Statistics will vary depending on sources, but the fact is; from governments on down to average citizens, debt affects us all. Averages could be lower or higher depending on where you get your statistical information, but the implication is clear; debt is a huge problem.

Now For The Good News!

The good news is this: Getting out of debt is easier than you might think. Understanding how interest rates and your credit score can work together in paying off your debt is a good start. Combining this knowledge with making minimal adjustments to your budget can help you pay off your debts fast and minimize the interest paid over time.

Of utmost importance is having a well thought out plan of action to pay back what you owe. Creating a plan is just the first step. Once that’s done, you must have a definite goal in mind and stick to your plan.

The goal of this guide is to help you understand the value of: 

  • Creating a budget
  • Lowering your interest rates
  • Making more than minimum payments on any credit debt
  • Eliminating non-essential memberships in your budget
  • Adjusting and/or renegotiating all services and membership programs

Use this knowledge as inspiration and motivation to create your personal financial action plan. And, most importantly, to take action and follow this plan until you have met your goal to get rid of debt for good.

The bottom line is this; you can make positive changes in your financial situation if you take this knowledge and put it to work for you.

This guide is presented in two parts. Part 1 will address the value of changing your financial situation. Part 2 will present some great tips and a step by step plan for setting up a reasonable budget and making a plan to both get out and stay out of crushing debt

We will dive into the details below, but first here’s a quick infographic summarizing this guide


In this section we are going to cover:

  • What debt is
  • The difficulty of getting out of debt
  • Why you shouldn’t sell everything (and what to do instead)
  • How interest rates affect your debt
  • Financial benefits of raising your credit score
  • Working with bad credit
  • Creating a clever budget
  • Seeking professional financial advice
  • The easiest way to get out of debt even if you have no extra money

Before you embark upon this journey to discover the best way to get out of debt quickly, it’s important to understand the value of making adjustments in your budget. Giving up things we value can be difficult. It’s important, when reigning in debt, to separate essentials from non-essentials. Consider the following example to help you make some of the more difficult adjustments.

Let’s imagine we have a $3,000 debt on a credit card loans with a 26% interest rate and the minimum monthly payment is $75. Here is a breakdown of what this debt looks like over the duration of the loan:

Money borrowed – $3,000
Monthly payment – $75
Months to pay off – 94
Interest accrued – $4049.95
Total paid – $7049.95

Just to make it clear; when you borrow money on interest, it cost money, sometimes a lot of money. In this case if you had borrowed $3,000 at 26% it would end up costing $4049.95 just to borrow it. That’s in addition to the initial $3,000.

Now let’s add just $25 to that minimum payment of $75 and see what impact it has on this debt:

Money Borrowed – $3,000
Monthly payment – $100 ($75+$25)
Months to pay off – 49
Interest accrued – $1897.66
Total paid – $4897.66

That’s a savings of $2151.95

That is just one small adjustment. By the time you finish reading this guide you will understand the bigger picture. Some changes and adjustments you can make will be as easy as making a phone call, but these phone calls will significantly reduce your debt

Let’s consider how much of an impact on your budget a quick 5 minute phone call can make. In this example, the purpose of making the call is to lower your interest rate. The difference in the following figures illustrates how you can lower the cost of your loan by lowering the interest rate without increasing monthly payments:

Money borrowed – $3,000
Monthly payment – $75
Months to pay off – 62
Interest accrued – $1615.87
Total paid – $4615.87

What changed here? The interest rate was reduced to 18%. With good credit you can reduce your interest rate simply by calling up your creditor and asking if you qualify for a lower one.

Sometimes you can lower your interest rates from as much as 10% to 15% with just one phone call. Even if you have bad credit it never hurts to make that call.

Now let’s take that lower interest rate of 18% and add $25 to the minimum payment of $75 and see how you much could save over time.

Money borrowed – $3,000
Monthly payment – $100
Months to pay off – 41
Interest accrued – $1015.49
Total paid – $4015.49

In this scenario you have shaved off 53 months of payments, and saved $3034.46 in accrued interest.

Getting excited yet? The above examples are only the beginning. Learning how to make small adjustments in your budget and lowering your interest rates will help you decrease your over-all debt and help you get out of debt faster.

If you are serious about getting out of debt, every section, every paragraph, and every word is here to inspire you to do just that. With this in mind, let’s get started with the basics.

What is Debt?

Simply put; It is something borrowed that is owed or due. Debt is all about owing money to a lender usually with interest. Sadly, we live in a world where “cash-on-hand” is becoming harder to come by. Most people are living paycheck to paycheck, with little, if any, left over…making the question “How do I get out of debt” a very common question.

Years ago, credit was reserved for major or unexpected purchases or repairs. Today it has become second nature to use credit for almost anything. Many people are getting into credit card debt from paying for life’s necessities such as food, utilities, even rent. It wasn’t too long ago that we would not even think about using our credit cards this way.

A study in 2014 on credit card spending statistics from TSYS Merchant Solutions revealed 14% of consumers are using credit cards for groceries. An additional 36% are using credit to buy fast food. The danger here is evident when you factor in minimum payments and accrued interest over time.

Credit card loans can be used for virtually anything and everything, this makes using a credit card extremely easy and attractive. Which is one reason it is so easy to accumulate debt, but so difficult to get out of.

Debt is much more than just credit cards though, it can be auto loans, a mortgage, personal loans, student loans, and so on. However, in this guide we will often use credit cards as examples because this is the type of debt affecting most households.

Why Getting out of Debt is Difficult

Credit debt is easy to obtain, but getting rid of it is a different story. The reason for this is due to the way creditors set it up. High interest rates, minimum payment plans, and ultimately the ability to use credit for almost anything are the top reasons trying to get out of debt is so difficult. By becoming aware of how your debt is affected by these factors, you will have all the tools you need to break free from the debt cycle and repay all your loans in the quickest way possible.

One of the most influential aspects of your debt lies within the interest rates. Understanding how this works is the first step in taking control of your debt.

How Interest Rates Affect Your Debt

In the examples already presented you were able to see just how much impact interest rates can have on your debt. The higher the interest rate, the longer it will take to pay down your debt due to the monthly interest accrued.

Every debt is made up of principle and interest. The interest accrued on your credit debt will determine how much of each monthly payment is available to pay down the principle of your debt.

The principle owed is what you actually borrowed. Interest is what is added to the money you borrowed based on the interest rate. You need to repay on both the principle and the interest. When you make a monthly payment it’s important to understand how much of your payment is going toward principle verses how much of that is added to your debt in interest.

In the example above, the amount of the principle is $3,000.00. That is the money borrowed. The interest rate is 26%. That is what the creditor charges for the loan. The interest accrued on the original $3,000.00 is $4,049.95.

Every point lowered on your interest rates will help you pay off your debts faster as long as you make these adjustments properly. The benefits to lowering your interest rates on your debts are as follows:

  • If you are struggling to make minimum monthly payments, lowering your interest rates will lower your minimum monthly payments as well.
  • Lowering your interest rates and maintaining the same payment will pay off your debt faster and decrease the amount of accrued interest paid.
  • Using the combination of lowering your interest rates and making more than the minimum payment is the fastest way to get out of debt.

In each of these scenarios you will be raising your credit score. So even if you are only able to make the minimum payments you are still benefiting your financial future by raising your credit score. As you raise your score over time you will qualify for lower interest rates.

Financial Benefits to Raising Your Credit Score

Your credit score can literally save you thousands of dollars per year in interest accrued on your debts, which is why one of the best tips to get out of debt is to raise your credit score. The lower your interest rates are the lower the interest accrued will be. This allows more of your monthly payment to be applied to principle. Raising your credit score begins with faithfully making your monthly payments.

In addition, a lower interest rate allows you to stretch your budget further. Even if your income does not change, making the same monthly payments on your credit card loans, with a lower interest rate, will apply more of your payment to the principle balance, and that is how you can pay off each of those large debts faster.

As you work toward paying off your debts and maintain a good credit history, you will be raising your credit score. This is why you will want to follow a plan that includes a regular check with your creditors to see if you can qualify for lowering the current interest rates of any credit debt you have.

Working with Bad Credit

If you currently have a bad credit score do not despair. Even if you have had a bankruptcy your credit score is not doomed to be bad forever. Suffice to say; bad credit can be overcome. It takes time, but with proper planning you can do it. However, this guide is not about how to repair bad credit. Your best option is to talk with a professional financial advisor. A professional financial advisor can help you understand what steps you need to take in order to repair and rebuild your credit.

Creating a Budget

Before you can create a budget it’s important to understand your financial situation. This will involve making a list of your expenses. Both essential and non-essential expenses should be included in this list. In addition, you will want to know the details of your debts; such as the interest rates and/or terms of all services, memberships, and subscriptions. Knowing the details will provide you with the quickest road map to pay down your debts.

Once you know the financial details of your budget you can begin making adjustments where needed. You will be happy to know that almost every bill can be adjusted or renegotiated in order to lower the monthly payment. Some adjustments and changes can be made immediately; others will have to wait until certain requirements are met.

Non-essential expenses should the first items in your budget that should be addressed. These may include entertainment, subscriptions, and memberships.

Every monthly bill that is not essential to your livelihood is one that can be canceled, adjusted or renegotiated to help you save money. It is important that you place a priority on paying off your debts over non-essential expenses. There are several options to consider:

  • Remove or cancel every non-essential expense.
  • Adjust services to lower the monthly payment.
  • Place the service or membership on temporary hold.
  • Move your services to a new provider who offers lower monthly payments or interest rates.

Giving up some forms of entertainment or non-essentials can be difficult (although maybe for you it won’t be, I can only speak for myself). This is why it is important to fully grasp the value of making these types of changes before you set up your plan. This is one of the best tips to pay off your debt much faster and save hundreds if not thousands of dollars per year with each adjustment.

Consider cancelling your T.V. subscription service. These services can easily run into the hundreds of dollars monthly. Use the following example to motivate and inspire you.

If you find it difficult to cope with canceling your TV subscription then try out Netflix and Hulu using a Roku TV streaming media player. These two subscriptions will cost you less than $20 per month. Let’s assume you are paying $100 per month for your TV subscription now. This adjustment will shave $80 off your monthly payments per month.

Let’s apply that $80 to the minimum payment on the $3,000 high interest credit card debt we discussed earlier and note the impact.

Money borrowed – $3,000
Monthly payment – $155 ($75 min. payment+$80 saved from T.V. subscription service.)
Months to pay off – 26
Interest accrued – $931.30
Total paid – $3,931.30

With this strategy you lowered the interest accrued from $4049.95 to $931.30 and decreased the monthly payments by 68 months (5.6 years)! Keep this result in mind as you consider each type of non-essential service or memberships that can be canceled or adjusted.

Remove every non-essential bill you can. Adjust or renegotiate any of these services that cannot be removed. And lastly, place a vacation hold on memberships you cannot cancel or renegotiate. A vacation hold will allow you to put your service on hold for a minimal fee. For example; a T.V. subscription can be placed on hold for up to six months. During this period the monthly payment that you would be paying to your T.V. provider can be redirected to a minimum payment on a high interest debt. It is important to remember that at the end of the vacation hold period your services resume and you are still required to honor your original contract.

We get emails all the time from people saying they want to get out of debt but have “little money” or “no money” left over after paying bills and can’t afford to pay more than the minimum payment. Little money (or no money) isn’t the issue, the issue is what the money is being spent on. As you can see from the paragraph above, you just need to cancel or pause the non-essential expenses until you climb your way out of debt.


Creating a G.O.O.D Plan

It’s time to create your G.O.O.D (Getting Out Of Debt) Plan. Benjamin Franklin is credited with saying; “If you fail to plan, you are planning to fail.” Would it make sense to start a complicated project, for example, building a house, without a detailed set of plans? Of course not, even a skilled professional recognizes the need for good plans and efficient strategies. Your financial future is no different; it requires a good plan and ideas in order for you to reach your desired goal to become debt free.

Your financial situation may include a variety of goals such as:

  • Getting completely out of credit card debt.
  • Paying off your vehicles.
  • Paying off your home loan.
  • Raising your credit score.
  • Refinancing your home or vehicles for a lower interest rate.
  • Lowering one or more high interest rate credit cards.

Once you have achieved your goal of getting out of debt, you may want to create new goals such as:

  • Starting a retirement fund.
  • Setting aside 10% to 25% of your income for emergencies.
  • Starting a college fund for your children.

As you can see, once your debts and spending habits are under control, your financial goals can take on greater meaning. Without the stress of burdensome credit card debts your focus can be on how to make your money work for your future. This highlights why it is important to consult with a professional and establish a working plan. We will discuss this next.

Financial Advice

The best type of financial advice will come from a qualified professional. A professional financial advisor will be able to outline in detail how to properly address your current financial needs. However, if you wan to eliminate debt on your own, follow the 9 step plan below.

The length of time it takes for you to get rid of debt will depend on your financial situation. If you have a solid income, you might be able to get out of debt in a year.  If you have low income it might take longer, but that doesn’t mean it’s not possible (although you might want to consider taking on two jobs…but that’s for another article). This guide offers good suggestions on how you can go about becoming debt free. However, there may be other options you would like to explore, such as debt consolidation. In any case, it’s always good to make an appointment with a qualified professional who can help you with your personal financial situation so you can tell them about yourself, your habits, and what’s holding you back.

Before getting into the 9 step method, I want to briefly talk about this idea of “fast money”. Another popular email I get is this: “I need fast money to pay my bills, what can I do?”. My answer is “change your mindset”. You don’t NEED fast money, you WANT fast money to take away the stress…but again, unless you’ve taken action, created a budget, and eliminated all expenses you no longer need, you don’t need more money. This will free up so much money you didn’t even realize you had.

Step By Step G.O.O.D Action Plan

As important as it is to have a plan it’s just as important to stick to it. The plan alone won’t solve your debt, but action will. Depending on how much debt has been accumulated, your plan could take months or even years to accomplish. It is important to realize that the end result will far outweigh the sacrifices you must make now to stick to a good financial plan. The following is a step by step action plan to help you get started.

STEP ONE – Understanding Your Current Financial Obligations

Action Item 1: Make a list of your most important monthly living expenses that need to be paid first and foremost.
Example: mortgage or rent, utilities, insurances such as your life, health, car, home, rental etc…

Action Item 2: Make a list of your monthly living expenses.
Example: food and vehicle expenses.

Action Item 3: Make a list of non-essential expenses.
Example: cable TV, health club and any type of program that requires a monthly payment.

Action Item 4: Make a list of all of your monthly credit card payments.

STEP TWO – Debt Details

Action Item 1: Create a list of all of your debts.

Action Item 2: Add in the interest rates and minimum monthly payments.

Action Item 3: Make special notation of any debts that have a time-limit on any low interest rate period.

STEP THREE – Elimination

Action Item 1: Look at your list of non-essentials.

Action Item 2: Consider what you can eliminate completely from your budget.

Action Item 3:Eliminate every subscription, service and/or membership program you can live without.

Action Item 4: Make a note of the financial benefits of each expense cut. Pay attention to the amount saved on interest accrued and shortening of the term of your loan.

Complete elimination of some of your favorite non-essentials can feel emotionally painful, but the emotional stress of out of control debt is far more damaging. For instance, debt can cause anxiety, depression, sleep issues, and marital stress, to name a few. The benefits of gaining control of your debts provide other emotionally welcomed benefits such as; stress relief, a good night’s sleep, and a family life free from unnecessary financial burdens.

This process of elimination may be the most difficult adjustment you will have to make, which is why it’s important to stay focused on what getting out of debt will do for you and your family overall. Make sure you don’t skip this step because this really is one of the best ways to gain control of your finances again

STEP FOUR – Negotiation Preparation

Action Item 1: Find out what your current credit rating is. You can see what your current credit rating is by obtaining a free credit report at

Action Item 2: Check out the competition. Make a note of any service membership or service providers with lower rates or better deals than what you have. Make sure you understand the terms of any changes made so you can avoid making changes that could harm rather than help your financial goal.

Action Item 3: Find out what banks offer zero interest balance transfers. Sometimes you can find these with no fee transfers.

Action Item 4: Go to your local Credit Union and see what type of interest rates you qualify for with a balance transfer. Be sure to ask what fee, if any, is charged to move your money over.

This preparation will be useful when talking with a customer service representative to negotiate any adjustments to your accounts. That is the next step.

STEP FIVE – Negotiation

Action Item 1: Call up every membership and service provider and negotiate to lower your bill. Start with your list of non-essential expenses.

Action Item 2: Call up all of your creditors to see if they will lower your current interest rate. If not, ask what you need to do in order to qualify for a lower interest rate. One of the best tricks is to just keep them on the phone and asking questions such as “what can I do to…” or “how can I…”. If they sense they are going to lose you as a customer, they will be willing to negotiate.

STEP SIX – Balance Transfers

Action Item 1: Transfer the balance (or as much as possible) from your highest interest rate credit card to any lower or zero interest credit card or credit union banks you qualify for.

Be sure to consider the terms as well as the fees of any balance transfer you make before you make it. There may be early payoff penalties, fees and/or other terms that could cancel out the benefit of these types of transfers.

STEP SEVEN – Entertainment, Groceries, and Vehicle Expenses

Action Item 1: After you have completed the above steps create a new list of your total monthly expenses.

Action Item 2: Create one list that includes all living expenses that must be paid each month.

Action Item 3: Create another list that includes entertainment, groceries, and vehicle expenses.

Action Item 4: Make a decision on how much money you will spend on each of the above expenses. This is now your monthly spending budget. The money that you have left over to spend on your essentials, such as groceries and your vehicle, are a priority over entertainment expenses.

Many people find it much easier to stay within their spending budget by placing this money into 3 separate envelopes. It is a daily visual reminder of how much money is actually available for such spending. This will help you to avoid the temptation to casually use your credit cards.

Obviously, there are many expenses that do not occur on a monthly basis, or are unexpected. Consider a separate envelope where a little could be set aside for these expenses. These may include clothing, car repair, or doctor visits.

STEP EIGHT – Planning Ahead

A key point to take away from this guide is that without planning, reaching your goals will be difficult if not impossible.

Planning ahead can save you hundreds of dollars monthly and thousands of dollars yearly. Keep this in mind as you consider eliminating as many of the following items from your spending budget:

  • Eating out. Restaurant meals are expensive. To save money try creating a menu at the beginning of the week for each day. You can also prepare meals and freeze them for occasions when you have no time or energy to cook at home.
  • Fast food. The convenience of drive-through restaurants is difficult to resist, especially when you are pressed for time and hungry. As an alternative, prepare food items such as beef jerky, nuts, and freeze-dried fruit to keep the hunger pangs down to a manageable level while away from home.
  • Buying bottled water. Ounce per ounce, this is one of the biggest money wasters there is. If you cannot stand tap water, try a home water filter, like a Brita, and fill your own bottles that you can take with you.
  • Avoid drinking soda, fruit juices, or other non-essential liquids. These can be a massive drain on your finances, not to mention your health! You could try alternatives that can be made at home for far cheaper.

STEP NINE – Keeping Track of Your Progress

Go over these steps as often as possible. It will benefit your goal of getting out of debt quickly. Some changes may have to be put off for a month or longer. But be sure to set goals and mark the due dates of those goals on your calendar.

Example: You want to terminate your TV subscription once your contract is up; add the date of termination to the calendar so you won’t forget to call and cancel once your contract is up. And try not to be tempted by offers to extend your contract for added services until you can really afford to do so.

Set up an appointment to go over these steps at least every 6 months. As your credit rating increases you may be able to qualify and benefit from:

  • Lower interest rates on your credit card/cards.
  • Zero interest rate balance transfers.
  • Lowering the interest rate on your vehicle loan.
  • Refinancing your home.

Becoming Debt Free

The purpose of this guide is to provide you with steps you can take when trying to get out of debt even if you have a low income or are broke. Once you are in control of your finances you can continue to move forward and lay the foundation for other financial goals. As you can tell, there is no major secret that only the “smart financial gurus” know. It’s about making simple (but emotionally difficult) lifestyle decisions.

In any case becoming debt free is a worthy goal, and one that with persistence, patience, planning, and maybe some creative thinking, can be obtained. Once you begin paying cash for everything and stop borrowing money, a whole new world will open up.

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