5 Moves To Help You Get Out of Debt

If you’re working to pay off debt, you’re not alone. In fact, the average American now carries a credit card balance of $6,501.¹ And approximately 44 million Americans collectively hold more than $1.7 trillion in student loan debt.² Under the weight of these obligations, it can be tough to feel on top of your day-to-day finances, let alone your long-term goals.

When it comes to tackling debt, developing a plan of action can help take you from feeling overwhelmed to feeling in control. Here are several repayment strategies that can help you get started. Keep in mind, everyone’s situation is different, and you should explore the options that make sense for you.

Aim Above the Minimum

It’s certainly important to make the minimum monthly payments across all your debts, but if you can pay even a little more, you can start to make a dent in ever-mounting interest and get to the principal sooner. 

While this can be tough when you have limited resources, take a hard look at your budget to see if you can allot more of your cash to your debt repayment efforts. There’s no need to deprive yourself of all the nice-to-haves that add to your quality of life, but perhaps you can pause one subscription service, or cook a few more of your meals at home, in order to free up some funds for this purpose.

Even small adjustments to your non-essential spending can have outsize impacts—and they can be temporary! Once your balances are manageable, you can always add items back into your budget.

Refinance Credit Cards With a Balance Transfer Card

If your credit card interest rates are slowing down your payoff momentum, you could consider transferring your balances to a new card that’s offering a 0% APR introductory special on balance transfers.

APR stands for Annual Percentage Rate and is the percentage that a creditor charges you for borrowing against a credit line. Having 0% APR during a promotional period allows you to make principal-only payments, which can help you pay off your debt faster. These promotions can often last for a year or more.

But be cautious. When the promotional period ends, your interest rate jumps up to the standard rate for that card, so you may want to pay off as much as you can before that happens. Also be aware that the credit card issuer might charge a fee to process your transfer. Ultimately, for the transfer to be cost-effective, the interest savings has to be enough to justify the fee. 

Pay Off Credit Cards With a Personal Loan

If you tend to get stuck in the minimum payment credit card trap, using a fixed-rate personal loan to pay off your credit cards may be a better approach. Making minimum payments on your credit cards leaves you with no clear payoff date in sight. On the other hand, a personal loan can offer a fixed repayment term with a clear end date that you can mark on your calendar.

A loan term of 12 to 60 months or more could give you ample time to pay off credit card balances. Try to look for a personal loan that doesn’t have a prepayment penalty fee. This means you won’t get penalized for paying off the loan early if you get a bonus or cash windfall.

Consolidate or Refinance Your Student Loans

If you have federal student loans, a Direct Consolidation Loan can combine multiple loans into one to simplify debt management. The Direct Consolidation Loan has no application fee, and you can apply for it online at StudentAid.gov(opens in a new tab).³

Another option for student loans is refinancing offered by private lenders and some state programs. Depending on your credit, student loan refinancing might land you an interest rate lower than the one(s) you’re currently paying, which can help you pay off your debt faster.

Shop for Better Auto Loan Rates

Say your credit has improved since you bought your last car. Refinancing your auto loan could lower the interest rate so you can accelerate payments.

When comparing refinancing options, review fees, interest rates and the total cost of the loan. Keep in mind that moving to a longer loan term isn’t always the best option. That is, trading in your 36-month loan for a 48-month loan could look attractive because it lowers your monthly cost, but it might not reduce your overall cost.

The Bottom Line

If your debt is getting in the way of you meeting other financial goals, it’s time to develop a payoff plan. Depending on your credit, you may be able to qualify for low-interest financial products that can reduce your payments and speed up the repayment process.

Before pursuing any debt refinancing or consolidation options, compare the costs and read the fine print—and consider speaking to a financial professional—so that you can choose the ones that are right for you.

Footnotes

¹ Experian, “Average Credit Card Debt Increases 10% to $6,501 in 2023(opens in a new tab).” 2024.

² National Conference of State Legislatures, “Student Loan Debt Series(opens in a new tab).” 2023.

³ StudentAid.gov, "Direct Consolidation Loan Application(opens in a new tab)." Accessed April 2, 2024.