Drowning in debt? how to get out

I'm drowning in debt

The total personal debt in the U.S. is at an all-time high of $14.96 trillion.1 Most of us have debt. However, if you are drowning in debt, you don’t have to stay there. A debt repayment plan will lower your stress level, get you debt-free, and get back to being able to pay bills and working towards your personal finance goals. When it comes to building good financial habits, managing your debt should be at the top of your list. So, if you’re drowning in high-interest debt, read on—help is here!

Spend Money Wisely: Create a Budget

Building a budget is the most critical thing you can do to get debt-free and have a positive relationship with your money. An online survey conducted by the Certified Financial Planner Board of Standards found that consumers who have a budget feel more in control, more confident, and more secure with their finances.2 A budget is a plan that puts every dollar you make into action. Budgets organize spending into categories and then prioritize those categories to meet your basic needs, essential bills, and extras—in that order.

It is not uncommon to find the thought of a budget intimidating. Some people think that they can’t budget money on a low income. Others think they have so much debt that they can’t afford to budget because budgeting is strict and doesn’t provide any “wiggle room.” 

The truth is a budget does all the money planning for you, which will give you more freedom. Instead of worrying about whether or not you can pay your expenses, you only need to follow your budget.

You don’t need to be an accountant or a spreadsheet expert to build a budget. If you’re new to budgeting, start simple. Gather all your pay stubs and deposit information for the month and total them up to get your total income. Then, take all your other debts and group them into different categories. Group your basic needs in a separate category and your extras in another. Here’s an example of some basic categories:

Basic Needs (Must be paid)Non-Essential Items
Rent/MortgagePersonal Spending
UtilitiesRecreation & Entertainment
GroceriesMiscellaneous/Extra Spending
Transportation (Gas, transit passes, etc.)
Insurance (Medical, Auto, Life, etc.)
Savings (including a separate emergency fund)

If your income exceeds your expenses, then you can cover all your bills. If your expenses exceed your income, you will need to cut unnecessary spending to balance everything out.

An excellent personal budget runs month to month. When you pay off a debt at the end of one month, you can adjust your expenditures and put more money towards paying off other debt in the upcoming month.

The Minimum Payment is Never Enough

With many loans—particularly with credit card debt—creditors will allow a minimum payment every billing cycle. This payment allows you to stay consistent and avoid any fees or penalties. And that’s about all that paying the minimum will get you. Even though it seems like a relief to have a small payment, it will do very little to reduce your balance.

Minimums are typically 2%-5% of the balance. Since your balance changes every month, your monthly amount due fluctuates. Paying minimums makes your credit card payments challenging to include in your monthly financial planning.

Sticking to the minimum will mean paying the maximum when it comes to interest. Because interest compounds over time, you are charged a fee every day that you have a balance.

Paying more than the minimum due moves your credit card debt down at a fast, steady pace. No matter what your creditors say is due, pay more.

Double Down on Payments

What’s better than making your monthly loan repayment on time? Making two payments, of course! If you get paid weekly or twice a month, try to make an additional payment. It doesn’t have to be as big as your primary payment; any additional money to your balance will be beneficial. 

Not only will extra payments help you eat away at your debt faster, but you will also avoid the late fees and penalties that commonly rack up. And you won’t waste any extra cash on unnecessary spending. Making significant and multiple payments will decrease your credit utilization, which will, in turn, improve your credit report and credit score.

Stop Using Your Credit Cards

If you want to stop drowning in debt, you need to learn how to manage a credit card wisely and keep your credit card balance or balances low. And the wisest thing you can do for your debt is to stop building it.

Credit cards are one of the fastest pieces of debt that can pile up. Regardless of the cashback perks of airline miles you might earn, your debt from credit cards may be holding you back. If you haven’t maxed your cards, stop using them right now. Every time you use your credit card, you put yourself further away from a debt-free life. Avoid using your credit cards until you can pay them off.

Settle With Credit Card Companies

If you have maxed out your credit cards, you could be feeling overwhelmed with debt. Even with your best budgeting efforts, paying off debt may look impossible—at least anytime soon. If you can’t figure out how to manage a large credit card balance, contact your credit card company and make an effort to negotiate.

After you fully understand the total amount you owe on the card, there are a few common settlement options available:

Workout Agreement

A workout agreement is a debt settlement plan that will allow you to adjust your current repayment structure. You may be able to lower your interest rate, reduce your monthly minimum payment, or remove past late fees. These actions won’t reduce your original balance. Instead, they will bring your account up to date and put you on a more manageable track towards repayment. Workout agreements are significant for people who are facing uncertain yet long-term financial issues.

Lump-sum Settlement

With a lump-sum settlement, you can end up paying less than you owe. In many lump-sum settlements, the borrower ends up paying just the principal amount of the debt.

Lump-sum settlements can help you save thousands in interest and fees. But, you must be ready to pay the settlement all at once. If you’re thinking about a settlement, know that you’re going to need a good amount of cash on hand.

Balance Transfer Credit Cards

A balance transfer is a fast way to pay off debt and save money. It is a strategy that allows you to move several accounts and combine them into one. Balance transfers are managed with a balance transfer credit card.

Many balance transfer credit cards offer lower interest rates and 0% introductory APRs, making them ideal for managing high-interest debt. Like a loan for consolidating debt, balance transfers provide lower interest rates than regular credit cards. So, if you use the balance transfer to pay off those cards, you can start repaying the loan with less interest.

There is usually a balance transfer fee of 3% for this transaction. That fee can be rolled into the consolidation and paid off with the loan. If your credit score is less than perfect, you should consider an installment loan for bad credit as a consolidation option. Keep in mind that balance transfer cards can definitely have their drawbacks, such as fees (mentioned above), interest increases after the promotional period, and can come with certain restrictions. And so, it is important to do thorough research. 

Also, keep in mind that balance transfer cards aren’t your old options; installment loans, bad credit loans, and personal loan options can all be used for consolidating debt. 

Hardship Program

Some credit card companies provide hardship plans for people who meet temporary yet unforeseen circumstances. Situations like serious illnesses or sudden job loss can qualify you to get your interest rates or minimum payments lowered. If you qualify for a hardship program, your account will go under a restructured repayment plan. This is especially true for federal student loan debt, which can be extremely flexible for borrowers.

Look Into Credit Counseling

With credit counseling, credit counseling agencies create relationships with your creditors to reduce your debt’s monthly payments and interest rates. These programs also remove or reduce late fees and penalties on your account. 

Acting on your behalf, a credit counselor will negotiate a repayment deal that you can afford. The goal of most of these debt management programs is to pay off your debts within 3-5 years.  

Nonprofit organizations like the National Foundation for Credit Counseling can connect you to a licensed credit counselor. 

FAQS About Drowning in Debt 

I’m struggling with credit card debts. Is a debt consolidation loan a good option for me?

Debt consolidation loans can be an effective way to combine multiple credit card balances into a single loan, often with a lower interest rate. This can simplify your financial situation by giving you just one monthly payment.

I’ve heard about debt snowball and debt avalanche methods. Which one Is more effective?

Both the debt snowball and debt avalanche methods are strategies to pay off debt. The snowball method focuses on paying off the smallest debts first, while the avalanche tackles debts with the highest interest payments first. The best method depends on what motivates you and your financial situation.

What’s the difference between secured and unsecured debt?

Unsecured loans and credit do not have collateral backing them, whereas secured debt, like auto loans, is backed by an asset. If you default on an unsecured loan, a debt collector may pursue you while defaulting on a secured debt could lead to asset seizure. 

I’ve saved some extra money. Should I put it in a savings account or use it to pay down debt?

If you don’t have an emergency fund, consider saving a portion for unexpected expenses. Once you have a decent emergency fund, focus on using the extra money to reduce high-interest balances or other debts. The more money you can allocate, the more financial security you have.

How can the Federal Reserve Bank’s interest rates impact me?

When the Federal Reserve Bank changes interest rates, it can affect everything from the interest on your savings account to your monthly car payment. A lower rate might mean cheaper car loans but reduced earnings in your bank account.

What are the benefits of a debt management plan?

A debt management plan can help streamline the process of paying off debt. They often involve lower monthly payments, reduced interest rates, and guidance from credit counselors. 

I’ve heard of debt settlement. What is it, and is it different from a debt consolidation?

Settling involves negotiating with your creditors to pay less than what you owe. Debt consolidation, on the other hand, is about combining multiple debts into one, often with better terms. Both are debt relief options, but their impact and suitability depend on your financial situation. Knowing the pros and cons of debt relief is vital before pursuing either option.

I’m having trouble paying my bills. Are there resources available to help?

Absolutely. Consider reaching out to the Financial Counseling Association for guidance. They can connect you with credit counselors who can provide advice on managing unsecured debts, creating budgets, and more.

How does having too much debt impact my overall financial situation?

Carrying lots of debt can strain your personal finances, leading to trouble paying essential bills or making minimum payments on debts.

I’ve noticed my total household debt increased this year. What steps should I take?

Firstly, review your spending habits and see where you can cut back. Prioritize paying down high-interest debts and consider reaching out for financial counseling. Methods like the debt avalanche or using a home equity loan for certain debts might also be options to explore.

How can I stay motivated while trying to become debt-free?

Celebrate small victories! Whether it’s paying off a particular card or staying within your budget for the month, acknowledge your progress. Stay connected with supportive friends or communities that encourage smart financial habits. It’s a journey, and every step you take brings you closer to financial freedom.

Is it possible to create a budget even if I’m terrible at math?

Absolutely! Budgeting is more about organizing and planning than complex math. There are numerous apps and tools available that can help you, or you can simply start with a pen and paper. Remember, the goal is to understand where your money is going.

Conclusion With CreditNinja

When the bills start to pile up, your debt can get out of control, and your personal finance situation can suffer. The pressure of debt in tough financial times can make many people feel as if there is no way out and that they are drowning in debt. The fact is, most Americans have debt, so you shouldn’t feel like you are alone because you really are not. With a bit of planning, hard work, and discipline, you can stop drowning in debt and start swimming towards a future full of financial freedom. Check out CreditNinja’s free blogs to learn more about managing your debt. 


  1. Average American Debt | Dave Ramsey
  2. New Survey Shows Consumers, No Matter Their Income or Assets, Need Support with Spending, Household Budgeting | CFP Board
  3. 7 Key Traits of People Who Are Free of Debt | The balance
  4. Debt-Free Living: How to Get Out of Debt for Good | Experian

Read More
If you could use a fast cash loan right now, you may be considering applying with Blue Mountain Loans. But is this the right fast…
loans like dollar hand
There are various online loan options to choose from when you need fast cash. However, it can be overwhelming trying to determine which lending option…
loans like check city
Check City is a lender that offers payday loans, installment loans, title loans, prepaid cards, and other financial services. But are loans like Check City…
loans like better day loans
Better Day Loans was a former lender that offered installment loan products. They no longer originate loans. However, plenty of other loans, like Better Day…

Quick And Easy Personal Loans Up To $2500*