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Seven Ways to Get Out of Debt in 2022

If you’re wondering how to get out of debt, you’re not alone. In 2021, the national household debt balance reached $14.96 trillion – the largest increase since 2007. Since more Americans are under pressure to resolve their debt, we’ve outlined several strategies that reduce or eliminate this financial liability.

What is Debt?

Debt is the amount of money you owe to a lender or creditor. Some examples of debt are mortgages, credit card dues, and personal loans. Although accruing lots of debt isn’t ideal, it may sometimes be unavoidable, such as mortgage payments or student loans. In these situations, debt is considered positive mainly because your financial objective has value and long-term benefits. In other cases, such as credit card debt, it’s seen as a hardship and can have a negative impact.

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How Debt Can Impact Your Life

Even if you aren’t sure exactly how debt affects your assets, you’re probably concerned about your financial future. Debt can impact you in a few ways. Here are a few examples to consider:

Debt can increase your credit utilization rate

Your credit utilization rate is the amount of credit you’re using divided by your credit limit. For example, if you have two credit cards with limits of $3,000, your total credit line is $6,000. If you spend $2,000 on each card, your total credit used would be $4,000. To calculate your credit utilization rate, divide $4,000 by $6,000. That total is then multiplied by 100 to figure out the percentage. In this case, it would be 66.6%.

As reported by Experian, your credit utilization rate should be below 30%, with an ideal rate in the single digits. If your rate increases, your credit score will be negatively affected. If you have a low credit score, it’s harder to borrow, and you could pay higher interest rates to counter the financial risk you pose to creditors and lenders.

You may be sent to collections

If you’re past due on your card and loan payments and your grace period has ended, it may go to collections. When this happens, your credit score drops. This event will be noted on your credit report and may remain there for up to seven years.

It may lead to bankruptcy

When there’s no other option to pay your debt, you may be forced to declare bankruptcy. Several negative implications are associated with bankruptcy, including property loss and damage to your credit score. It may also impact those who are financially tied to you, such as a sibling or friend who may have co-signed your mortgage or personal loan. They may still be responsible for paying a portion of the loan.

What Are the Strategies to Get Out of Debt?

While it may be hard, it’s not impossible to reduce or eliminate your debt. Before getting started, you should review your financial obligations and list your debts in detail. This list should include any personal loans, mortgages, car leases, and credit card debt. Then, you can figure out which strategy works for you.

The Snowball Method

The snowball strategy works well for those who are organized and disciplined. It’s most often used for high-interest credit card debt, but it can be applied to any non-mortgage financial situation. To start, you’ll lower all your monthly payments to meet the minimum amount due for each. With the extra cash you have available, pay off the loan or credit card with the lowest balance. Once that’s paid off, move to debt with the next lowest balance. Continue following these steps until you’ve eliminated your loan or credit card balances.

Read more about the pros and cons of the Debt Snowball method.

The Windfall

Whether you receive a lump sum of money from an inheritance, lottery winnings, salary bonus, or other means, you may be tempted to spend it on something extravagant. However, you can use your windfall money to pay off your loans or credit cards instead since it’s how to get out of debt fast. Keep in mind that a windfall is often considered income, so you may have to pay taxes on it, even if it’s an inheritance.

The Avalanche Strategy

The avalanche method helps you save money because it limits interest charges. In this strategy, you’ll pay the minimum monthly payment on every debt. Then, you’ll put extra money toward the debt with the highest interest rate until it’s gone. Once it’s paid off, you’ll put your extra cash towards the next highest interest rate debt and so on.

Taking the avalanche strategy helps you save more money because it puts an end to compound interest growth. When people are caught off-guard by increasing debt, it’s because they didn’t anticipate compound growth interest, which is interest compiled on other interest. Experian explains, “Each time you add interest to a principal amount, whether on an investment or a loan, that interest—plus the principal—will earn more interest during the next period.”

After reading through these strategies, you may feel overwhelmed by the time and resources it takes to do this yourself. By connecting with representatives from debt consolidation and debt relief companies, you’ll have someone to guide you and discuss specialized plans to pay down debt and meet your financial goals.

Debt Consolidation

Debt consolidation combines multiple smaller debts into one large loan or credit card. For example, if you have credit card debt from several companies, you’re likely paying high-interest rates on multiple debts. If you merge that debt to a single credit card with a lower interest rate, it’s much easier to manage. Also, you’ll have lower monthly payments because you’ve consolidated your loans and reduced your interest rate. There are two ways to consolidate debt—balance transfer credit cards and debt consolidation loans.

Balance transfer credit cards

In this scenario, you’re responsible for finding a credit card and transferring your other balances to it. Ideally, you’ll apply for a credit card with a 0% introductory annual percentage rate (APR). This rate is usually offered for about 12 to 20 months. You can transfer your high-interest rate debts to this card while the APR is suspended, and by the time your new card accrues interest, you’ll have paid off most of your debt.

Debt consolidation loans

With a debt consolidation loan, you find a debt specialist who can offer you a lower interest rate than what you’re currently paying on the rest of your debts. With the money you receive from the loan, you pay off those high-interest debts. If you decide to apply for a debt consolidation loan, you’ll likely need a credit score of 670 or higher.

Although it may sound complicated, many debt consolidation companies make this process easier. For example, Accredited Debt Relief offers a fast and free consultation to review your options. Once you’ve agreed, an accredited debt specialist works with you to come up with a plan and provides guidance and support throughout the process.

If you still aren’t sure where to start, there are organizations dedicated to finding consolidation loan companies for you. Below are two companies that list several debt consolidation loan companies based on your specific circumstances, so you have multiple options to choose from.

Lending Tree

Lending Tree has loan specialists who consider several factors, such as the amount of debt you owe and your credit score, before making recommendations. Once you fill out their online application, they’ll present you with a list of lenders based on your answers. Lending Tree rates companies based on APR and the number of loans closed within a month.


AmOne was founded in 1999 and has helped over one million people find the right debt consolidation loan for their individual circumstances. After you fill out an online questionnaire or call their toll-free number, an AmOne representative will present you with several affordable and appropriate loan options.

Debt Relief for Getting Out of Debt

Debt relief refers to several strategies to reduce or eliminate debt. We’ll cover each of these methods in detail below. Remember that the best option for you will depend on your unique financial situation.

Credit Counseling

Working with a credit counseling agency is a debt-reduction technique and how to get out of credit card debt. Reputable agencies are usually non-profit and charge low fees for their services compared to their for-profit counterparts. Credit counseling representatives are there to provide advice and guidance. They will likely review your financial obligations and the debt you’ve accrued before presenting you with a range of options according to your financial status. But that’s not all they do.

Credit counselors help create budgets, offer free educational workshops, and develop plans to repay debts. One example of a credit counseling agency is Consolidated Credit Solutions, a non-profit organization that provides financial counseling and debt relief services.

Credit counselors often recommend debt management programs (DMPs). DMPs are designed to reorganize your finances. A DMP provider can reach out to lenders and negotiate interest rate reductions for your debts. This is how to get out of credit card debt without paying all the interest you’ve accrued. Once a plan is in place, a DMP provider opens a savings account. You contribute monthly payments to that account, and your counselor pays your bills and debts according to the contract.

DMPs are used to pay off unsecured debts, such as medical or utility bills. It takes about 48 months to complete the program. DMPs usually lower your credit score because creditors can close your accounts. However, this approach won’t cause significant harm to your credit report: When you seek debt counseling, it’s noted on your credit file but doesn’t affect your score. It’s only there to inform lenders who may consider extending more credit to you.

Credit counseling shouldn’t be confused with credit repair.

Debt Settlement

The debt settlement method is closely related to DMPs, but there are differences. When you work with a debt settlement company, they create a savings account in which you contribute monthly payments. However, you usually stop making payments to all your current creditors or lenders. When you stop paying your lenders, they report your defaults. This has a serious impact on your credit score.

When the settlement company has enough money to start paying off your debts, they contact your lenders and negotiate the debt on your behalf. A lender may agree to this method because they otherwise run the risk of you not paying them back at all if you declare bankruptcy.

A debt settlement company is for-profit. They typically charge you 20% to 25% of the amount you were able to save or on your total debt. Sometimes debt settlement companies charge additional fees for things like setting up a savings account.

If you don’t want to pay debt settlement companies, you can create a settlement plan with creditors on your own. However, this takes time and requires strong negotiation skills. Freedom Debt Relief is a debt settlement company that has been in business for over 15 years and resolved over $10 billion in debt. As they state, “Negotiating with creditors on your own can be a long and laborious process. That’s why many people turn to professional debt settlement companies for help.”


Bankruptcy wipes out part or all your debt, but it comes with consequences. As mentioned earlier, it should be considered a last resort. There are long-term negative effects after declaring bankruptcy:

  • Bankruptcy information stays on your credit report for about ten years. This may make it difficult for you to apply for credit cards, mortgages, and other loans.
  • It can result in property loss if you’re forced to sell your personal assets to pay back creditors.
  • It can affect other people who are financially linked to you. For example, if your parents co-signed your car lease, they may be held financially responsible for that debt.

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How to Get Out of Debt FAQs

What does it mean to be in debt?

When you're in debt, you owe money to a creditor, lender, or other institution, such as a hospital. A few examples of debt are mortgages, car loans, and credit card bills.

Is it bad to be in debt?

As stated above, some debt can be good. When debt has a lasting benefit and repayment plans are reasonable, it's positive. Other debts that cause financial hardships are considered bad and could lead to serious consequences. These may include:
  • contact from a collections agency
  • bankruptcy
  • damage to your credit score

What are the downsides to debt settlement?

In addition to paying fees, if you turn to a professional debt settlement company, you'll also withhold payments to your lenders, which negatively affects your payment history. This can lead to low credit scores and damaging credit reports. Still, this may be a good option if you want to avoid bankruptcy.

What if I've been contacted by a debt collector?

If you're contacted by a debt collector, listen to what they say to determine if it's a true complaint. Don't share personal or financial information. Debt collectors must follow a strict set of rules and should be reported if they're in violation. To learn more, visit the Federal Trade Commission's website.

How do I get out of debt with no money and bad credit?

First, stop using the cards you can't pay off. Next, partner with a financial expert who can review your situation and negotiate with lenders and creditors on your behalf in some of the ways we cover in this article.


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