Getting out of debt comes down to two things: paying less interest, and making the same payments every month until the balance hits zero. The hard part is picking a path that fits your debt, because a $4,000 card balance and a $40,000 pile need different tools. Here are six ways out, who each one fits, and what each one costs.
The short answer
Ben’s 3-step path out of debt
- Write down every debt. Balance, APR and minimum payment, all in one list. You can’t beat a number you haven’t looked at.
- Cut the rate or shrink the pile. Still paying on time? A consolidation loan can swap several card APRs for one fixed payment. Owe too much for a loan? Debt relief is the next stop.
- Pick a payoff order and put it on autopay. Highest APR first saves the most. Smallest balance first feels the best. Either works if you stick with it.
Checking your rate at Upstart is a soft credit check and won’t affect your credit score. Loan amounts, APRs and approval depend on your profile, and not everyone qualifies.
Which way out fits you?
Find the row that sounds like you. Each option below has its own section with the catch spelled out.
| Option | Fits you if | What it costs | Credit impact |
|---|---|---|---|
| Avalanche or snowball | You can cover your minimums and have a little extra each month | Nothing but discipline | None, and your score tends to rise as balances fall |
| Consolidation loan | You pay on time but the card APRs are crushing you | Interest, plus an origination fee on some loans | Soft check to see your rate, hard inquiry if you accept |
| 0% balance transfer card | Your credit is good and you can clear the balance during the intro period | A transfer fee, plus a regular APR on whatever is left after the intro period | Hard inquiry for the new card |
| Nonprofit credit counseling | You can pay every month but the interest is eating you alive | Ask the agency what it charges before you sign | Cards in the plan are often closed, so your score can dip first |
| Debt relief (settlement) | You owe $7,500 or more, you are behind or about to be, and a loan will not work | Up to 25% of the debt you enroll at National Debt Relief | Hurts at first, since accounts go late while you save for settlements |
| Bankruptcy | There is no realistic way to repay even half | Court fees and attorney costs | Stays on your report for years |
Costs and credit effects vary by lender, card and program. The sections below show the numbers we could check.
Ben’s take
Notice that the first row costs nothing and the last row costs the most. Work down the table from the top. Plenty of people jump to settlement because the ads are loud, then find out a payoff plan and a loan would have done the job.
Way 1: Pay it down yourself with the avalanche or snowball method
This is the free option, and it works whenever you can cover your minimums and find a little extra. You pay the minimum on every debt, then throw every spare dollar at one target.
Avalanche means the highest APR goes first. Snowball means the smallest balance goes first. Here’s how they differ. Say you have a $1,200 card at 19%, a $6,000 card at 27% and a $3,500 card at 22%. Snowball attacks the $1,200 card first. Avalanche attacks the $6,000 card, which costs about $135 a month in interest alone ($6,000 times 27% divided by 12). The $1,200 card costs about $19 a month.
So avalanche saves more money, and snowball gives you a win in the first month or two. If a quick win keeps you going, snowball is the better plan for you. If you’re motivated by math, take avalanche.
If you can’t cover the minimums at all, start with Help paying bills for free programs and hardship options, then come back here.
Ben’s take
Pick the plan you’ll still be following in month six. A perfect plan you drop in month three saves you nothing.
Way 2: A debt consolidation loan
A consolidation loan pays off your cards with one new loan. You make one fixed payment for a set number of years. It makes sense when the new APR is lower than what your cards charge and you stop adding to the cards.
Here’s the math with made-up numbers. At 24% APR, $12,000 in card debt piles up about $240 a month in interest ($12,000 times 24% divided by 12). At 14%, the same balance piles up about $140 a month. That gap is the whole reason to consolidate. It’s an example, not an offer, since your own APR decides everything.
The catch is that the rate you’re offered might not beat your cards. Loans from Upstart list APRs from 6.1% to 35.99%, and the lowest rates go to the most qualified applicants. That’s why you check your rate first. Checking is a soft pull, so you can look without a mark on your credit. If you accept an offer and go on with the full application, a hard inquiry follows.
Our first stop for most people
Upstart personal loan
- Loan amount$1,000 to $75,000
- APR6.1% to 35.99%
- Terms3 or 5 years
- Rate checkSoft pull, no score impact
Who it fits: you pay your bills on time but your cards are charging high APRs, and you want one fixed payment with an end date.
Good to know: there are no prepayment fees, so paying it off early costs nothing extra.
The catch: some loans carry an origination fee that comes out of what you receive. A sample Upstart loan is $10,000 over 60 months with an 8.31% origination fee of $831, which works out to a 23.48% APR. Rates and minimum amounts vary by state, and not everyone is approved.
Upgrade is another lender worth putting next to your Upstart offer. It lists personal loans up to $50,000 with fixed rates and no prepayment fees, and checking your rate won’t hurt your credit score. A sample Upgrade loan is $10,000 at 16.28% APR over 36 months with a 5% origination fee ($500), so $9,500 reaches your account and the payment is $335.30 a month.
Ben’s take
A consolidation loan only helps if you stop using the cards afterward. Paying them off and then running them back up is how people end up with the loan and the cards.
Way 3: A 0% balance transfer card
A balance transfer card gives you an intro period where new balances you move over charge no interest. Every dollar of your payment goes to the balance, which is great if you can finish before the intro period ends.
Two things decide whether it works. First, the transfer fee, which comes on top of the balance you move. Second, what the card charges once the intro period is over. Both vary by card, so read them before you apply. Then divide your balance by the number of intro months. If that monthly payment isn’t realistic for you, a consolidation loan with a fixed end date is usually the safer bet.
These cards generally want good credit, and a new application means a hard inquiry. Don’t charge new purchases to it while you pay down the transfer.
Way 4: Nonprofit credit counseling and a debt management plan
This is the option people forget about. A nonprofit credit counselor looks at your whole budget for free and can set up a debt management plan. The agency negotiates with your card companies, and you make one monthly payment to the agency instead of several to your creditors.
A plan can bring lower interest rates, one payment and an end to collection calls. The National Foundation for Credit Counseling keeps a list of member agencies, and you can start at NFCC.org, which is free to browse.
Who it fits: you can make payments but interest is winning, and a loan didn’t pan out or you were turned down. The tradeoffs are that a plan usually runs for years, cards in the plan are often closed, and you should ask any agency for its fees in writing before you agree to anything.
Way 5: Debt relief when the balance is too big for a loan
If you owe a lot, you’re behind, and no lender will give you a loan that makes sense, debt relief is the next option. A company negotiates with your creditors so you pay back less than you owe. You pay the company a fee for doing it. This is also called debt settlement.
For debt too big for a loan
National Debt Relief
- Best for$7,500 or more in card, medical or personal loan debt
- FeeUp to 25% of enrolled debt
- When you payNo fees until a debt is settled
- Timeline24 to 48 months
How it works: you stop paying your creditors and make one monthly deposit into a dedicated account instead. The company negotiates settlements as the account grows, and it earns its fee only when a debt is settled.
Who it fits: you owe $7,500 or more, you’re already behind or about to be, and a consolidation loan isn’t realistic.
The catch: while you save, accounts go late, collectors keep calling, and a creditor can still sue. Your credit score takes a hit. The savings are also not guaranteed. National Debt Relief’s own pitch is that you can pay up to 45% less than you owe, which is the best case.
Here’s the math in the best case. You enroll $20,000. If it settles for 45% less, you pay creditors about $11,000. The fee at 25% of the $20,000 you enrolled is $5,000. That’s about $16,000 total, or around 20% less than you owed. It falls well short of the 45% headline because the fee comes on top, and it gets worse if the settlements land higher than the best case. Below $7,500 in debt, the fee eats most of what you’d save, so a payoff plan beats it.
National Debt Relief isn’t available in every state. If it isn’t taking sign-ups where you live, the link above sends you to another provider that matches people with debt relief companies.
One more thing most people miss: when a creditor forgives part of a debt, the forgiven amount can count as taxable income. Read the IRS guidance on canceled debt before you enroll.
Ben’s take
I’d treat debt relief as the option for when the other roads are closed. It can work, but it costs you in credit and fees, and you need the discipline to keep depositing every month.
Way 6: Bankruptcy, the last resort
Bankruptcy can wipe out card and medical debt when there’s no realistic way to repay it. It’s a legal process, so talk to a bankruptcy attorney before you sign up for anything else. Some attorneys offer a free first consultation.
The credit effect is long. A bankruptcy, whether it’s Chapter 7 or Chapter 13, can stay on your credit report for up to 10 years, as the CFPB explains. But if you can’t see paying back even half of what you owe, a fresh start can beat years of fees and stress. Before you choose it, read these bankruptcy mistakes to avoid.
Not sure? Follow this path
Read down the list and stop at the first line that sounds like you.
- Can’t cover this month’s minimums? Start with Help paying bills.
- Owe under $7,500 and paying on time? Run the avalanche or snowball plan. If the APRs are high, check a consolidation loan rate as well.
- Owe more, still paying on time and your credit is decent? Check your rate on a consolidation loan.
- Rate isn’t better than your cards, or you were turned down? Call a nonprofit credit counselor and ask about a debt management plan.
- Owe $7,500 or more and already behind? See if National Debt Relief fits.
- Can’t see paying back even half? Talk to a bankruptcy attorney before you sign anything.
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Common questions about getting out of debt
What is the fastest way to get out of debt?
Pay more than the minimum, aim the extra at the highest APR first, and cut the rate if you can. A consolidation loan with a lower APR sends more of every payment to the balance. Extra income on top of that speeds it up more than anything.
Is a debt consolidation loan a good idea?
It’s a good idea when the loan’s APR, including any origination fee, is lower than what your cards charge and you stop using the cards. It’s a bad idea if your offer is near your current card rates or if you’d run the cards back up.
Does a debt consolidation loan hurt my credit?
Checking your rate at Upstart is a soft inquiry and doesn’t affect your score. If you accept and go forward, a hard inquiry follows. Paying off cards can lower your card utilization, and on-time payments help over time. Missed payments hurt.
Avalanche or snowball: which one should I pick?
Avalanche (highest APR first) costs less in interest. Snowball (smallest balance first) gives faster wins. The best one is the one you’ll still be following months from now.
Can I get out of debt with bad credit?
Yes, but your options narrow. Upstart looks at more than your credit score, and checking your rate has no score impact, so it costs nothing to see. A nonprofit credit counselor is the usual next step if a lender says no.
How much debt do I need for debt relief?
National Debt Relief works with people who owe $7,500 or more in card, medical or personal loan debt. Under that amount, fees would eat most of the savings.
Should I save money or pay off debt first?
Build a small cushion first so one surprise bill doesn’t land on a card. Then hit the debt hard. Our guide to the best ways to save money shows how to build that cushion fast.
What if my income is low?
Start with free help: hardship plans from your creditors, local programs and a nonprofit credit counselor. Our help paying bills page has places to start.
Keep reading
MoneyAnswers may receive compensation when you apply through partner links, which does not change how an option is described. Upstart loans are made by Upstart’s lending partners, and rates, amounts and approval depend on your profile and state. Information comes from each company’s published terms and can change, so confirm details with the company before you apply. General information, not personal financial advice.
