How to Get Out of Debt: A Step-by-Step Guide That Actually Works

How to Get Out of Debt: A Step-by-Step Guide That Actually Works

The average American household carries over $103,000 in debt, according to the Federal Reserve's most recent consumer finance data. If you're reading this, you're likely staring at credit card balances, student loans, car payments, or some combination of all three — and wondering whether there's actually a way out. There is. Getting out of debt isn't a mystery. It's a process. And this guide gives you that process, step by step, with real numbers and no fluff.

Written by the BON Credit Team | Last updated: March 2026

This guide covers every major debt payoff strategy, compares them honestly, and gives you the framework to pick the one that fits your life. Bookmark it — this is the only debt guide you'll need.

What Should I Do First When I'm Overwhelmed by Debt?

Before you can pay down debt, you need to stop the bleeding. Feeling overwhelmed is a signal that your current system isn't working — not that you're bad with money. Here's how to get your footing.

Step 1: Write Down Every Debt You Owe

Get a piece of paper or open a spreadsheet. For each debt, write:

• Who you owe (lender name)
• Current balance
• Interest rate (APR)
• Minimum monthly payment

This step sounds obvious, but most people avoid it because the total is scary. Do it anyway. You cannot solve a problem you won't look at. A typical example might look like this:

Step 2: Build a Small Emergency Buffer (Before Paying Extra)

This sounds counterintuitive, but it's critical. The CFPB (consumerfinance.gov) recommends having at least $400 to $1,000 in a liquid savings account before aggressively paying down debt. Why? Because without a buffer, every unexpected expense — a flat tire, a medical copay, a broken appliance — goes right back onto a credit card. You end up in a loop.

Save $500 to $1,000 first. Put it in a high-yield savings account and don't touch it except for true emergencies. Then go after the debt.

Step 3: Stop Adding New Debt

You can't bail out a boat that's still taking on water. Freeze discretionary credit card use. This doesn't mean cutting up your cards — it means pausing. Switch to debit for everyday spending while you're in payoff mode.

What's the Fastest Way to Get Out of Debt?

The fastest way to get out of debt is to free up as much monthly cash as possible and throw it at your balances — while using a strategy that minimizes how much interest accrues in the meantime. Here are the key levers:

1. Increase Your Monthly Payment (Significantly)

Making minimum payments is a trap. On a $5,000 credit card balance at 22% APR, paying the minimum (~$100/month) means you'll be in debt for over 8 years and pay more than $4,700 in interest — nearly doubling what you borrowed. Increase your monthly payment to $250/month and you're out in under 2.5 years, paying roughly $1,500 in interest. That's a $3,200 difference from one decision.

2. Find Extra Money to Throw at Debt

Where does extra money come from? The most common sources:

• Cancel unused subscriptions. The average American spends $219/month on subscriptions they're barely using, according to a 2024 survey by C+R Research. The BON Credit app automatically finds and helps cancel these.
• Sell stuff. A weekend of selling unused items on Facebook Marketplace or eBay can generate $200 to $800 in a single month.
• Pick up extra income. Even $200/month from a side gig accelerates a debt payoff plan by months or years.
• Tax refund. The IRS reports the average tax refund in 2024 was $3,011. Putting that directly toward debt is a powerful one-time boost.

3. Lower Your Interest Rates

The lower your interest rate, the more of each payment goes toward principal instead of fees. Options for lowering your rate include balance transfer cards (covered below), personal debt consolidation loans, and simply calling your credit card issuer and asking for a rate reduction. According to a 2024 LendingTree survey, 76% of cardholders who asked for a lower interest rate received one.

Which Debt Payoff Method Is Best — Avalanche or Snowball?

This is the most debated question in personal finance, and the honest answer is: it depends on you. Both methods work. Neither is objectively superior — what matters is which one you'll actually stick with.

For a deep-dive comparison with side-by-side calculations, read our full guide: Debt Avalanche vs. Snowball: Which Payoff Method Wins?

The Debt Avalanche Method

How it works: Pay minimums on all debts. Put every extra dollar toward the debt with the highest interest rate first. Once it's paid off, roll that payment to the next highest-rate debt.

The math advantage: Using the example table above, targeting the store card at 28.99% first, then the Visa at 22.99%, saves you more money in total interest than any other sequence.

The downside: If your highest-rate debt is also your largest balance, you may go months without seeing a single balance reach zero. That can feel discouraging.

Best for: People who are motivated by math and long-term savings, and who can stay disciplined without frequent wins.

The Debt Snowball Method

How it works: Pay minimums on all debts. Put every extra dollar toward the debt with the smallest balance first. Once it's paid off, roll that payment to the next smallest balance.

The psychology advantage: Research published in the Journal of Consumer Research found that people who focused on paying off one account at a time were more motivated and more likely to stay on track. Clearing a balance, even a small one, triggers a real sense of progress.

The downside: You may pay slightly more in total interest compared to the avalanche, especially if your smallest debts have low interest rates.

Best for: People who need momentum and visible wins to stay motivated — which is most people.

How Do I Get Out of Credit Card Debt With No Money?

This is the situation millions of Americans are in — income barely covers expenses, the minimum payments feel crushing, and there's nothing left over. Here's what you can actually do.

Option 1: Nonprofit Credit Counseling and a Debt Management Plan (DMP)

A nonprofit credit counseling agency — look for NFCC-certified agencies at nfcc.org — can negotiate reduced interest rates with your creditors (often down to 6% to 9%) and put you on a structured monthly payment plan. You make one payment to the agency; they distribute it to your creditors. DMPs typically run 3 to 5 years. Fees are low (often $25 to $50/month) or waived based on income.

The CFPB has a detailed guide on DMPs at consumerfinance.gov.

Option 2: Cut Expenses Aggressively (Even Temporarily)

If you can free up even $75 to $150 per month, you have a debt payoff weapon. A temporary spending freeze — no restaurants, no streaming, no clothing, no extras — for 90 days can generate enough surplus to get the snowball rolling. Think of it as a sprint, not a marathon.

The BON Credit app scans your spending automatically to find the fastest and easiest cuts. It's free, and it takes about 2 minutes to set up: Download BON Credit.

Option 3: Hardship Programs From Your Creditors

Most major credit card issuers have hardship programs that temporarily reduce your interest rate, waive fees, or lower your minimum payment if you're experiencing financial difficulty. These programs aren't advertised — you have to call and ask. Be direct: explain your situation and ask what options are available.

Option 4: Debt Settlement (Use With Caution)

Debt settlement means negotiating with creditors to pay less than the full amount owed. It severely damages your credit score and may result in taxable income (the forgiven amount is typically reported as income to the IRS). It's a last resort — consider it only if you're already significantly delinquent and bankruptcy isn't an option you want to pursue.

Should I Use a Balance Transfer to Pay Off Debt?

A balance transfer card can be one of the most powerful tools available to credit card debtors — but only if used correctly. The idea: move your high-interest credit card balance to a new card offering 0% APR for an introductory period (typically 12 to 21 months). During that window, every dollar you pay goes entirely toward principal, not interest.

For a full breakdown of how to pick the right card and avoid the traps, read: How a Balance Transfer Card Can Save You Hundreds in Interest

The Math

Suppose you have $6,000 in credit card debt at 21% APR. You transfer it to a card with 0% APR for 18 months. If you pay $333/month during those 18 months, you pay the balance off entirely with $0 in interest. Without the transfer, paying the same amount at 21% APR, you'd pay approximately $780 in interest over the same period.

The Catch: Transfer Fees

Most balance transfer cards charge a fee of 3% to 5% of the transferred amount. On a $6,000 transfer, that's $180 to $300. Still worth it compared to $780 in interest — but account for it in your math.

When a Balance Transfer Makes Sense

• Your credit score is 670 or above (needed to qualify for the best offers)
• You have a realistic plan to pay off the balance before the promotional period ends
• You won't use the old card to accumulate new debt

When a Balance Transfer Doesn't Make Sense

• Your credit score won't qualify you for a meaningful promotional rate
• The balance is so large you can't realistically pay it off in the promo window
• You've had trouble with credit card discipline in the past

Your credit utilization ratio matters here too. Opening a new card and transferring balances affects your score in multiple ways. Read: What Is a Good Credit Utilization Percentage?

How Long Does It Take to Get Out of Debt?

There's no universal answer, but there are honest ranges based on how much you owe and how aggressively you pay.

The extra monthly payment column tells the real story. Adding $200 to $500 per month to debt payments can cut your payoff timeline by more than half. The hard part isn't knowing this — it's finding that extra $200 to $500. That's where automated tools and spending analysis make the biggest difference.

What Affects Your Payoff Timeline

• Interest rates. Every point of interest you reduce saves months. This is why balance transfers and rate negotiation matter so much.
• Consistency. Missing payments or adding new debt resets the clock. Consistency compounds in your favor.
• Income changes. A raise, tax refund, or bonus put directly toward debt can shave years off your timeline.
• Payoff order. Choosing the right method (avalanche vs. snowball) optimizes your sequence and can save months.

If you've improved your credit score during the payoff process, you may also qualify for better loan rates and lower APRs. See: How to Improve Your Credit Score Fast in 30 Days

Your Complete Debt Payoff Action Plan

Here's everything above condensed into a step-by-step action plan you can start today:

1. List all debts — balance, rate, minimum payment for every account
2. Build a $500-$1,000 emergency buffer — before paying extra on anything
3. Stop adding new debt — pause credit card use for discretionary spending
4. Find extra money — cancel subscriptions, sell stuff, find side income
5. Choose your payoff method — avalanche (saves money) or snowball (builds momentum)
6. Consider a balance transfer — if your credit qualifies, 0% APR accelerates everything
7. Make your plan automatic — set up auto-payments so you never miss a due date
8. Track and adjust monthly — review your balances once a month and look for ways to accelerate

Frequently Asked Questions

Is it better to pay off debt or save money?

Do both, in the right order. First, build a small emergency fund ($500 to $1,000). Then focus on high-interest debt (anything above 7% to 8% APR). Once high-interest debt is gone, redirect those payments to savings and investing. Paying 22% interest on a credit card while earning 4.5% in a savings account is a guaranteed way to lose money.

Does paying off debt improve your credit score?

Yes, typically. Paying off revolving debt like credit cards reduces your credit utilization ratio, which is one of the most impactful factors in your score. A utilization drop from 80% to 20% on a card can add 40 to 80 points to your score over time. Paying off installment loans (car, student) has a smaller but still positive impact.

Should I pay off debt before buying a house?

Not necessarily all debt, but your debt-to-income ratio (DTI) matters significantly for mortgage approval and rates. Lenders typically want your total monthly debt payments to be below 43% of your gross monthly income. Paying down high-balance debts before applying for a mortgage can improve both your approval odds and your interest rate.

What's the difference between debt consolidation and debt settlement?

Debt consolidation combines multiple debts into one loan, ideally at a lower interest rate. You still pay 100% of what you owe — you're just reorganizing it. Debt settlement involves negotiating to pay less than the full amount owed. Settlement severely damages your credit score and may create a tax liability. Consolidation is generally the better option for most people.

Can I get out of debt on a low income?

Yes, but it takes longer and requires finding creative ways to increase payments. Nonprofit credit counseling (NFCC), hardship programs from creditors, and income-driven repayment for student loans are tools specifically designed for lower-income borrowers. Even $50 to $100 extra per month, consistently applied, makes a measurable difference over 12 to 24 months.

When should I consider bankruptcy?

Bankruptcy is a legal tool of last resort for people whose debt burden is genuinely unmanageable — typically when total unsecured debt exceeds 50% of annual income and there's no realistic path to repayment within 5 years. Chapter 7 wipes out most unsecured debt; Chapter 13 restructures payments over 3 to 5 years. Both have serious long-term credit impacts (7 to 10 years on your report). Consult a nonprofit credit counselor or bankruptcy attorney before deciding.

Sources: Consumer Financial Protection Bureau (consumerfinance.gov), Federal Reserve Consumer Finance data, LendingTree 2024 Credit Card Survey, C+R Research 2024 Subscription Study, Journal of Consumer Research (Northwestern University). Internal rates and timelines are illustrative examples based on publicly available amortization calculations.