How to get out of debt: a step-by-step plan to take back control

Getting out of debt rarely fails because of a lack of willpower. It fails because people start without knowing exactly how much they owe, because new charges keep piling up while they pay off old ones, or because they choose a quick fix that drags the problem out for years.

This article is the complete plan, from start to finish: how to list everything you owe, how to tell whether your debt level is dangerous, how to stop new debt, what order to pay in, where to find extra money and when tools like consolidation, credit counseling or bankruptcy make sense.

Step 1: list all your debts

Plenty of people know what they pay each month, but not how much they owe in total or what each debt really costs. Without that full picture, any plan is guesswork. Gather your loan statements, card statements and banking app, and write down four things for each debt:

• Balance: what you still owe today, not what you originally borrowed.
• APR: the real yearly cost, including interest and fees. It's the number that lets you compare debts with each other.
• Monthly payment: what you pay each month, or the minimum payment in the case of credit cards.
• Time left: how many months remain, if the loan has a fixed term.

Here's what the list might look like for someone with four consumer debts:

That's $15,500 of debt and $450 a month in payments. The key part of the table isn't the total, but seeing the APRs side by side: the debt with the smallest payment is by far the most expensive. To understand which debts make sense and which don't, the article on good debt vs bad debt explains it with examples.

Step 2: work out your debt-to-income ratio

Your debt-to-income ratio (DTI) is the share of your gross monthly income that goes to debt payments, including your mortgage or rent. The formula is one division: monthly debt payments ÷ gross monthly income × 100.

There's no legal limit, but many lenders use 36% as a comfortable ceiling, and for mortgages they rarely go above 43% to 50%. In the example above, with a gross income of $4,500 a month, the four debts take up 10%. Add a $1,350 mortgage payment and the ratio rises to 40%: well over a third of your paycheck committed before you buy groceries or pay the power bill.

• Under 36%: the situation is manageable. With an organized plan you can get out without outside help.
• Between 36% and 50%: you're at the limit. Any surprise expense forces you onto a card, so it's time to act.
• Over 50%: it's hard to get out just by cutting expenses. This is where talking to your lenders and the tools in step 6 start to make sense.

For a broader view of where you stand, the financial health test gives you a score in a few minutes and shows which areas need work.

Step 3: stop taking on new debt

Paying off debt while opening new debt is like bailing water without plugging the leak. Before you speed up payments, cut off the ways new debt gets in:

• Credit cards that carry a balance: according to the Federal Reserve, the average interest rate on cards that are charged interest is around 22% in 2026. With $2,400 at 22% and a $60 payment, about $44 of each payment goes to interest. It would take you more than six years to pay it off and cost about $4,370 in total. Raise the payment to $120 and you're done in just over two years, paying about $3,020.
• Buy now, pay later: splitting a purchase into four interest-free payments seems harmless, but several small split purchases at once turn into a fixed monthly payment you don't see coming.
• Overdrafts and payday loans: they're very expensive loans dressed up as convenience.

If you have good credit, a balance transfer card with a 0% intro APR can stop the interest clock on card debt for 12 to 21 months. It only works if you pay the balance down during that window and don't add new charges, and most charge a transfer fee of 3% to 5%.

To stop relying on credit, you need a budget that covers your real monthly costs. If you don't have one, start with the article on how to make a personal budget.

Step 4: choose the order you'll pay in

Once your list is ready, the rule is simple: pay the minimum on every debt and put all your extra money toward just one. When it's gone, roll its payment into the next one. The only decision is where to start:

• Debt snowball: you start with the smallest balance. Quick wins keep you motivated.
• Debt avalanche: you start with the highest APR. It's the option that costs you the least interest overall.

In the example, the avalanche would start with the credit card and the snowball with the phone. Neither is wrong: the best one is the one you'll stick with. You'll find a full worked example and a comparison of both in the article on the debt snowball method.

Step 5: free up extra money for your debts

Minimum payments only keep debt in check. What wipes it out is the extra money you add every month. These are the most common sources:

• Subscriptions and recurring charges: go through the last three months of statements. Streaming services, a gym or apps you don't use can add up to $30 or $40 a month.
• Small everyday spending: coffee, food delivery and impulse buys are often the biggest margin. The article on small daily expenses helps you find them.
• Insurance and bills: shopping around for car insurance, your phone plan or internet once a year can save hundreds of dollars without changing your life.
• One-off income: a tax refund, a bonus or selling things you don't use can go straight to your most expensive debt.

Set the extra amount as an automatic payment on payday, as if it were just another bill. Whatever is left in your account at the end of the month almost never makes it to your debt.

Step 6: talk to lenders, credit counseling and bankruptcy

When your debt-to-income ratio is very high or you're already struggling to make payments, the plan above may not be enough. There are four tools, from least to most drastic:

• Talk to your lenders: ask for a hardship plan, a lower rate or a longer term before you stop paying. It's the first step and the one that does the least damage to your credit. We cover it in detail in the article on how to negotiate with your bank.
• Debt consolidation loan: combining several debts into one loan with a single, lower payment. It eases the monthly squeeze, but often does so by stretching the term, so you can end up paying more interest overall.
• Nonprofit credit counseling: agencies accredited by the National Foundation for Credit Counseling (NFCC) review your budget for free or at low cost and can set up a debt management plan, often with lower interest rates on your cards.
• Bankruptcy: the last resort. Chapter 7 wipes out most unsecured debts but may require selling some assets and depends on a means test; Chapter 13 sets up a three to five year repayment plan. Both stay on your credit report for years, so talk to a qualified attorney before filing.

Once you're out: how not to fall back in

Your last payment is a big moment, but also the most delicate one. Without a cushion, the first unexpected expense goes straight back onto a card. That's why the payment you just freed up should have a new job right away:

• First, the cushion: keep setting aside the same amount each month until you have an emergency fund covering at least three months of expenses.
• Then, your goals: once the cushion is in place, that same payment can go to your savings or investing goals.
• Review your cards: if a card keeps tempting you to carry a balance, set it to autopay the full statement balance or lower its limit.

What you learn getting out of debt, like knowing what you owe, what it costs and where every dollar goes, is exactly what will protect you from now on. The difference is that this time your money works for you and not for the interest.