Tips to get out of debt

Debt, more often than not, is bad for your personal finance. The burden of servicing debt and paying your EMIs can make compounding work against you. Being in debt can make you pay a much higher price than you ought to be and have a long term implications on your financial journey.

But if you have debt, and multiple types of debt, how do you get out of it?

One way is gradually paying off your debt and timely EMIs and eventfully repay the loans. This may take a long time and you may end up paying exorbitant amount of money in interests apart from missing out on opportunity to make your money grow.

tips to get out of debt

Here are some tips to get out of debt.

(Here I have assumed that you don’t have too much cash in hand at this point of time (hence, no virtual debt) and hence would need some time to get off debt. At the same time you should be having a stable source of income which can help you repay the debt)

1. List down your loans and debts

Make a list of all of your debts – home loan, car/ vehicle loan, personal loan, education loan, gold loan, credit card outstanding or any money borrowed from friends/ relatives. Arrange them in the order of priority of repayment. The most expensive debt should be the one you should be paying first ideally. Home loan would probably be the last one on its way out, due to its sheer magnitude and usually a lower interest rate. You may also want to understand the prepayment penalties & other terms associated with prepayment (though it may not be a major influencing factor as compared to interest rates)
2. Create a debt repayment plan

Once you have a debt repayments plan ready, you need to create enough cash flows to pay off he debt. Taking debt to pay off debt is not a feasible solution. So, you need to build up a corpus to stay off debt. And the lifestyle that got you into debt will not help you come out of debt. So you need to plan to cut down on some expenses so save money. (unless you see sudden inflow of money!)
3. Save money to pay off your debts.

This is where your plan to save money needs to be actioned. And unless you get some windfall gains that can magically repay your debt, it is a old fashioned hard grind. You’ll need to delay gratification an control your expenses. This would entail skipping few parties or avoiding some shopping trips or “downgrading” your lifestyle.
4. Start paying off your debt one by one

Rather than paying parts of most of your debt, pay off your debt one by one. Start with the most expensive debt first (usually credit card debt with its high interest rates). Pay it in full. Then pay off the next debt. And so on.
5. Avoid any additional debt

Ensure that you avoid additional debt while clearing off your debt and any debt in future. Once you have cleared up your debt, ensure that you don’t fall into debt trap again. And this would require some small or big lifestyle changes – like saving and investing first before spending, sticking to your budget and so on. (More on this later!). This is probably the most important of tips to get out of debt and being debt free later on!


Being debt free is one of the prerequisites for archiving financial independence, if you are aiming for that. With the above tips to get out of debt, one can hopefully get rid of debt and start the journey towards achieving financial goals.


3 thoughts on “Tips to get out of debt

    1. Indeed … Difficult to pay off your debt, but once you do there may be an immense sense of freedom.

      Thanks for visiting my blog and sharing your thoughts.

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