What's the Best Way to Get out of Debt?

By Linsey Knerl. Last updated 23 March 2008. 18 comments
Photo: Chris Young

Debt is the hottest topic on personal finance blogs around the world. Why? I would venture to guess it is because so many people are drowning in it. The unfortunate truth is that few people care to read about debt until it has already had a negative affect on their financial situation. This can make the final solution to their debt problems even more difficult to hear about.

I'm no stranger to debt. I had been managing school loans, vehicle loans, and a few small credit card payments since I was 19, and I was successful in keeping a clean credit record. Then a few poor life choices left me responsible for over $30,000 in credit card debt at age 24. With nothing tangible or memorable to show for my efforts, I could have become bitter. Maybe I could have filed for bankruptcy (this was before the laws changed considerably.) Ultimately, however, I chose to consolidate, reduce the rate, and pay those debts off early.

Why am I telling you all of this? Two reasons: (1) It lends credibility to my view on debt and repayment. (2) To keep you from throwing things at me when you read the next paragraphs:

The number one question I hear from people in debt is NOT: “What's the best way to pay this off?”

It is usually: “How do I get out of this debt?”

Note that in their wording, they are usually implying that they are wanting to get out of their obligation of the debt, though not necessarily through repayment. Google searches for popular debt-related terms bring up scads of results for help in “Getting out of debt” -- all of which seem to give a quick and easy way out. A few clicks and some reading will tell you, however, that the scheme is all the same, and repayment is almost always involved.

So to answer the question of “What is the Best Way to Get out of Debt?” -- my answer is simple: Whatever way is quickest, easiest, and costs you the least amount of money, while at the same being perfectly legal and moral. Ditching your financial obligations by having a cousin co-sign while you walk away is NOT the best way. Making a conscious decision to default when you could be paying something (anything) is NOT the best way. Looking for answers from the sky for a way for you to not have to repay a debt (when you could if you wanted to) is NOT the best way.

I am saying this with the full understanding that someone reading this will have a unique situation that warrants blowing off a loan. I will guarantee that a handful of others will insist that they had no choice. I am, therefore, not talking to you, specifically. The $30,000 in debt that I repaid gave me zero benefit. It was the product of putting my name on a few accounts that were taken advantage of in the most grievous of ways. It would have been easy to say, “It wasn't my debt,” default and start over 7 years later, instead of taking almost 6 to pay it all back. For this reason, I am speaking to the majority of those suffering from excessive debt who may not feel the benefit of their spending, realized they spent more than they could truly afford, or who simply got the short end of the debt stick. A loan is a loan, which is almost always best to pay back. Period.

I realize that if everyone paid back their loans, small claims courts would shut down, and debt collectors would lose jobs. Search Engine Optimization would change dramatically, and books on finance would lose their place among the Best Seller's List. Thankfully, there will always be those who won't pay up. But for the rest of us, there is still one answer to the debt problem: Make payments – no matter how small. As painful as it feels right now, no amount of money can buy the integrity and honor of making good on a loan.

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Mr. Mundis,

This is the best book I've ever read regarding debt and I'd recommend it to anyone. In addition to strategies for dealing with debt the book talks about how you got there and suggests simple tools/actions to avoid making the same mistakes in the future. I go to it often when I feel myself slipping toward plastic. It's not the easiest book to find. I saw it in B&N a few years back but I can't find it now. You can order it through Amazon. I'm sure I sound like an advertisement for the book but if debting has been a way of life for you really need to read this.



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Too many people try and take the easy route out, as opposed to doing their best to put absolutely everything into their debt in order to pay it off. Excellent post, too many people need to work hard to get out of debt and don't.

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The last line of your article says it all, Linsey! During my ordeal, it never really occured to me that I didn't have to pay the funds back. Doing things right means only very incremental change over time but gives sustainable results. It is a matter of spending discipline, and changing materialistic attitudes....

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I think the part of making a payment, no matter how small is so important. I have a huge amount of private student loan debt. When I was in school to go into a lucrative profession it didn't seem like such a big deal, when I got sick during my first pregnancy and my son was born prematurly everything changed -- I couldn't work for a while, and then when I was able to work again it was not for as many hours or in my field as I had expected because my children needed me home as much as possible. I was at my wits end, I wanted to pay back my loans and always had every intention of doing it but I couldn't even come close to making the minimum payments. For quite a while I didn't pay anything -- I finally talked to the loan people and they were willing to take $50.00 a month and keep my loan in good standing on my credit report. I've been able to keep upping that ammount as time as gone on. Even though it will take longer and cost more in intrest its really been a good thing to pay just a little bit at the time. For anyone who has a lot of debt and can't pay talk to the creditors. Even a very small ammount might help save your credit and will encourage them to work with you since they know you intend to pay it off.

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I say that I am "getting out" of debt. I know what you mean about people who believe that getting out means getting something for free. For me, using the term "getting out" addresses the fact that I and I alone got myself INTO debt. I am paying it off little by little, and one day, hopefully, I will have gotten out.

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my first husband agreed to an easy divorce if I took on his business debts. I made up a form letter, sent it to all his creditors offering to pay each of them a set minimum amount each month until the debt was gone. Those who made nasty phone calls got the option of taking me to court and getting nothing (I had no assets, only an income). They all agreed and I eventually got them all paid off. It was the best deal I ever made; my ex was arrested/convicted/imprisoned within a year for dealing drugs.

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... just like any addiction, going totally 'cold turkey' may not be the best thing for you. So, are we right when we say:


For example: we all know Consument Debt = BAD - this means no credit card debt; no car loans; no buying anything that you can't pay cash for.

But, Investment Debt = GOOD - there is an old-but-wise saying that says that "your investment property loan (debt) of today is what you will be worth tomorrow".

If you can afford the mortgage payments, lock in as much debt at today's low prices on investments (real-estate and stocks) that you CAN afford and hold for the long-term.

Under THESE circumstances: DEBT = RICH

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Money is just too easy to get these days, with credit cards and low interest loans and zero percent interest purchases. Its so easy to get into debt in America, that its become another national security issue.

People neeed to have a plan for paying back their loans before they take them, or better yet, they need to save for short term purchases and invest for long term goals.

Linsey Knerl's picture

Thanks so much for reading and responding!

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Congratulations on a significant achievement. My circumstances weren't too different.

I do want to make sure that people understand that bankruptcy -- under previous or current law -- is not immoral. We give it a stigma, but it's a legal and ethical way to handle one's being overwhelmed. It is a *last, last, last* resort. Several U.S. Presidents had filed for bankruptcy, for example.

There are also legal, ethical means of debt reduction and cancellation. But it comes through working *with* the lenders, and not despite them. The book mentioned at the start of the comments is a great resource.

A loan to buy a car is not the same as credit card debt. If you're not careful, the terms you accept may be foolish, but it is not "bad debt."

Thanks for writing the piece.

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Thanks for this great reminder that we're all responsible for our own debt repayment 'schemes'. I made the decision last week to lower my 403b contributions to 1% in order to put more money into my credit debt repayment. On April 1st, I hope to throw $550 onto my debt. This is the largest amount I've ever paid (aside from tax refunds, gifts etc) from my salary, and I'm already getting a little nervous. I know I can do it----with some creative budgeting!

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nmh - I'm proud of you.

It ain't easy to pay off a debt like that. It's agonizing and slow and demoralizing. And yet you seem to have a positive attitude about it.

I worked for years (and continue to work) to pay off my student loans. I lived on the cheap and did without and struggled with my new family to pay off my debt. At the same time, my best friend went to Jordan and bought a new house before declaring bankruptcy. To get the biggest bang for her buck she financed a "free" trip to Italy just before filing.

She called me not long afterward to complain that her student loan wasn't forgiven. Here I was, proud to have paid off my college credit cards and starting in on my student loans without having the benefit of her luxuries, trying to be understanding. I did explain to her that responsibility with her student loans meant that another kid would have those loans available. Also, it wasn't her lender's fault that she didn't finish her graduate program. She wasn't open to that so I dropped it. I do value her friendship even if I don't share her financial values.

Anyway, you are doing a great personal favor to me. You make me feel good about my struggle. It's good to know you are in the world.

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but I'm neurotic about repaying debt. I realize in many cases it isn't your fault but still, to know that I owe a parking ticket or money to a friend for dinner, or that I'm late on a mortgage payment, all of these are like nails on a blackboard to my ears. Is that weird? I feel like everyone I know is in heavy debt.

When I got engaged I helped my fiance get out of $18,000 of credit card debt. He also owed his dad $5,000. Since his dad wasn't charging interest, we slowed payments there and upped payments to the card, including borrowing against his 401K. I'm sure some people might advise against that, but a 401K is getting a lot less interest than the credit card was charging. Plus, the constant stress of the credit card was a strain on other areas of our lives. Good luck to everybody!

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I feel that HONESTY is one of the KEY VALUES when dealing with such financial obligations. If you are not honest with yourself and your own personal financial situation, then you won't cheat yourself out of taking the necessary actions to reduce debt and in the long term eliminate it.

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But the wording isn't necessarily looking for a quick easy exit. Debt is something that sometimes you can almost become - for me it seems like an intrinsic part of my identity. "Getting out of debt" for me is NOT about not repaying my debt (I have been very diligently and continue to) it is about getting out of the lifestyle I was in where debt was a part of being alive.

I talk about getting out of debt as my goal all the time. But it isn't about the quick fix. it is, however, about getting out. Through repayment.

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It's probably just being the daughter of a frugal mom (MSN Money blogger) but I always approach debt as "What's the best way to get out of debt?"

Now, I say "always" because I had an illness at 19 that has caused health issues and hindered my ability to work. But I'm stubborn and wouldn't admit it, so there were years of just barely getting by. And, towards the end, debt for some medicines I couldn't afford out of pocket.

My husband also has health issues that have recently left him unemployed. We're making do with unemployment while we try to figure out what he can do more steadily -- and still making payments on our debt.

That said, we're tackling his student loans first. (I was raised to attack high-interest stuff first.) He's had them for years and wants to be rid of them. I suppose technically that means we're snowflaking -- but I still advocate getting high APR debts paid down before low APR debt. (If it's not as psychologically rewarding enough as paying down small debts first, calculate how much interest you've saved with your last payment and leave it up on a white board as a nice reminder that you're making progress.)

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