Debt can be a significant obstacle to homeownership and other financial goals. A high debt-to-income (DTI) ratio makes it difficult to qualify for a mortgage. It can also prevent you from saving for retirement, your child’s college education, or other important objectives. Reducing your debt is essential to achieving these important life goals. Debt can be a real burden, weighing you down month after month. It can be tough to keep up with your bills and save for a rainy day when you’re in debt. But making only the minimum payments to your creditors could leave you stuck in debt for a long time. It’s essential to take action and get out of debt as soon as possible.
Getting out of debt does not have to be a miserable experience. There are plenty of options available that can help you get your finances back on track. You can adjust your budget to free up funds to pay more than the minimum on your monthly debts or consolidate your debts with a consolidation loan or balance transfer card. Another way to get out of debt is to use the debt snowball method. This involves paying off your smallest debts first and then using the money you save to repay your larger debts. You can also use financial windfalls, such as a tax refund, to pay down your debt faster.
How much debt does the average person owe?

As of 2021, Americans owed an average of $96,371 in debt. This figure includes debt from mortgages, credit cards, auto loans, personal loans, and student loans.
Here’s how it breaks down by generation:
Gen Z (18-24) $20,803
Millennials (25-40) $100,906
Gen X (41-56) $146,164
Baby boomers (57-75) $95,607
Silent generation (76+) $39,859
Debt relief strategies

If you’re ready to get out of debt, start with the following steps.
1. Make a bigger payment than the minimum
Making a budget is the first step to taking control of your finances. Once you know where your money is going, you can decide how much you can afford to put toward your debt.
It can take a long time to pay off a credit card balance – especially when only making the minimum monthly payment. For example, consider a card with a $15,000 balance and 17 percent APR. With a minimum amount of $450 per month, it would take almost four years to repay the balance.
Paying more than the minimum on your credit card each month can help you pay off your debt faster and save on interest. Try using a credit card payoff calculator to see how much you could save.
Why this works: Paying more than the minimum balance on your credit cards can help you pay off your debt faster.
How to start: Make your extra payment before the due date in the current billing cycle. This will help you avoid late fees and keep your account in good standing.
2. You can try the debt snowball method
The debt snowball method is a great way to pay off your debts quickly. With this method, you make the minimum payment on all of your debts except for the smallest one. Then, you pay as much as possible on the smallest debt until it is gone. Once that debt is paid off, you move on to the next smallest debt, and so on. This method is very effective in reducing your overall debt load quickly.
Now, imagine you’re swimming in debt. You’ve got a $5,000 credit card balance, an $1,000 auto loan, and $10,000 in student loans. The debt snowball method says to pay off the auto loan first because it has the lowest total balance.
Debt snowballing can be a great way to focus on one debt at a time, building momentum and staying on track. However, you may want to disregard this method as an option for loans with much higher interest rates, such as payday or title loans. These usually have an APR of 300-400 percent and should be paid off as soon as possible.
Why this works: With this method, you pay off your debts one by one, starting with the smallest balance. This will help motivate you to keep going and see progress quickly.
How to start: First, list all your debts, arranged from smallest to most significant balance. Then, continue paying the minimum amount on all your debts each month.
3. Debt refinancing
Debt refinancing can be a great way to save money on interest payments and pay off debt faster. You can refinance mortgages, auto loans, personal loans, and student loans.
There are several ways to consolidate your debt and lower your monthly payments. You can take out a debt consolidation loan, transfer your balance to a 0% APR credit card, or negotiate with your creditors for a lower interest rate. Consolidating your debt can help you save money and get out of debt faster.
Why this works: A lower interest rate can save you money monthly, and a set loan term can help you pay off your debt faster.
How to start: It is important to research which option will work best for you. Once you have decided on a debt consolidation loan, get preapproved to get the best interest rate possible.
4. Windfalls should be committed to debt
One of the most brilliant things you can do with a tax refund or stimulus check is to put it toward your loans. This way, you can get ahead on your debt and save money in the long run. You can commit the entire amount to your loans or split it between debt and something fun – like a future vacation or an expensive dinner.
Unexpected money can come from many sources, like inheritances, work bonuses, and cash gifts. While it may be tempting to spend this extra money, remember that every little bit helps when working towards your debt-payoff goals.
Why this works: When it comes to paying off debt, using financial windfalls wisely can help build momentum.
How to start: It’s important to be mindful of how you spend your money, especially when paying off debt. Choose wisely how you will allocate the funds, and be sure to promptly apply the amount you choose to your debt balances.
5. Pay less than you owe
Debt settlement companies will negotiate with your creditors to try to lower the debt you owe. This can be a good option for people struggling to make their monthly payments and cannot negotiate with their creditors themselves.
Debt settlement companies may seem smart when you’re trying to pay less than you owe and escape old debts. However, the Federal Trade Commission warns of some risks associated with this option. For example, stopping payments on your debts during negotiations can lead to a lower credit score.
Why this works: You’ll only pay a portion of what you owe and can move on knowing you no longer owe those creditors.
How to start: Reach out to your creditors to explore the possibility of settlements and get any agreement in writing. Or, consider hiring a reputable debt settlement company to handle negotiations on your behalf.
6. Take a look at your budget
Earning more money is the best way to pay off your debts faster. You can do this by picking up a part-time job or side hustle. Another way to pay off your debts faster is to spend less money.
It’s important to take a close look at your spending plan and determine what’s most important to you. Classify each expense as a need or want, and identify areas where you can cut back. Make the necessary adjustments to your budget, and use the extra money to pay down your debts.
Why this works: Making financial sacrifices in the short term can help give you the extra funds needed to pay down your balances faster. This may require some lifestyle changes, but it will be worth it in the end.
How to start: Assessing your spending plan is the first step to finding areas where you can cut back. Once you have identified where to save, move those funds into a “debt-payoff fund” in your spending plan.
The negative effects of debt on your life

Debt can make it harder to qualify for other loans and may result in higher borrowing costs. It can also keep you from getting your dream job.
Debt-to-income ratio
Borrowers with high debt-to-income (DTI) ratios may find it more challenging to qualify for loan products. For example, most lenders require a debt-to-income (DTI) ratio of 43 percent or less when applying for a mortgage.
Your DTI ratio is essential in determining how much you can afford to spend on your monthly mortgage payment. Your DTI is calculated by dividing your current monthly debt payments by your gross income. So, for example, say you have a $300 student loan payment, a $500 auto loan, and a $200 minimum credit card payment.
This would give you a DTI of 26.67%. In this instance, the maximum mortgage payment you would qualify for is $612.50. However, finding a home within that price range could be difficult, depending on where you live.
A high debt-to-income (DTI) ratio makes it difficult to qualify for a mortgage. It can also prevent you from saving for retirement, your child’s college education, or other important objectives. Reducing your debt is essential to achieving these important life goals.
Rates of interest
Your revolving account balances directly impact your 30% utilization ratio, which in turn affects your overall score. Therefore, keeping debt levels low and making timely payments is important – this will help improve your score over time.
Lenders and creditors typically view borrowers with lower credit scores as being riskier. As a result, these individuals usually receive higher interest rates on debt products than those with good or excellent credit. In some cases, they may even be denied financing altogether.
Credit checks for jobs
As someone who works in law enforcement, financial services, or the military, you may be subject to a credit check by your employer during the application process. A poor credit score could mean you are rejected for the job, as a vulnerable financial situation makes you more likely to accept bribes.
In summary

Debt bondage is something that can feel very overwhelming and difficult to break free from. But, by following some key strategies, you can start progressing in getting out of debt and improving your overall financial health.
Understand why you got into debt first and change your behavior to prevent yourself from returning to debt once you’ve paid off what you owe. You can get out of debt and improve your financial situation with a little effort.