How to get out of debt: start with the list
Anyone working out how to get out of debt should start the same way. Before choosing a method, write down every debt with four facts: who it is owed to, the balance, the interest rate and the minimum payment. Most people carrying debt on a low income have never seen it all on one page, and the total is often a relief compared with what they feared.
The example below uses three debts that look like many real ones.
| Debt | Balance | Interest rate | Minimum |
|---|---|---|---|
| Credit card A | $2,400 | 24.99% | $60 |
| Credit card B | $900 | 19.99% | $30 |
| Medical bill, payment plan | $600 | 0% | $25 |
| Total | $3,900 | $115 |
The minimums add up to $115. The budget in the example month from the home page sets aside $230 for debt, so there is $115 a month of extra money to point at one debt at a time.
Avalanche or snowball: a debt payoff plan in numbers
There are two well-known ways to decide where the extra money goes.
The avalanche method pays minimums on everything and sends every extra dollar to the debt with the highest interest rate, here card A. When it is gone, the money rolls to card B, then the medical bill.
The snowball method, popularized by the radio host Dave Ramsey, sends the extra money to the smallest balance first, here the $600 medical bill, then card B, then card A.
Run month by month with $230 a month, the two plans finish like this:
| Method | Months to debt-free | Total interest paid |
|---|---|---|
| Avalanche | 20 | about $688 |
| Snowball | 21 | about $874 |
The avalanche is cheaper by about $186 and a month faster. The snowball pays off the first debt sooner, which some people need to stay motivated. Both beat paying minimums alone by a wide margin. On card A by itself, $60 a month takes 87 months and about $2,810 in interest. Raising that one payment to $100 cuts it to 34 months and about $961.
For most people the avalanche is the better debt payoff plan. Choose the snowball only if a quick first win is what keeps you going; the extra cost here is real but small.
How to get out of debt on a low income when minimums do not fit
Sometimes the problem is not choosing a method. The minimums alone are more than the month can carry, and the question of how to get out of debt on a low income becomes a question of what to protect first. Then the order changes.
First, protect the essentials. Rent, utilities, food and transport to work come before unsecured debt like credit cards and medical bills. Missing a card payment hurts a credit score; missing rent can cost the home.
Second, call the lenders before a payment is missed. Many card issuers have hardship programs that lower the rate or the minimum for a few months. Hospitals often have financial assistance policies, and nonprofit hospitals are required to have one.
Third, consider a nonprofit credit counselor. Agencies that belong to the National Foundation for Credit Counseling (NFCC) offer free or low-cost budget reviews and can set up a debt management plan, which often brings card interest rates down considerably. Be wary of companies that charge large upfront fees or promise to make debt disappear.
Medical debt deserves its own note. Since 2023 the three national credit bureaus no longer report paid medical collections or medical collections under $500. A $600 bill on a payment plan is not the same as a card balance, and it rarely belongs at the front of the queue.
A debt payoff plan you can keep for 20 months
Twenty months is a long time. The plans that survive it share a few habits.
Automate the minimums on every debt, so a busy week never produces a late fee. Pay the extra amount by hand once a month, on a set day, so you see the balance fall.
Keep the buffer. It is tempting to throw every spare dollar at the debt, but a household with no cash put aside will put the next car repair on a card and start again. In the example budget, $75 a month still goes to the buffer while the debt is paid down.
Stop adding to the balances. That usually means taking the cards out of phone wallets and online shops. It does not necessarily mean closing them; an open card with a zero balance can help a credit score.
And when a debt is paid off, do not let the payment disappear into daily spending. Roll it onto the next debt the same month. That roll is what makes either method work.
Questions readers ask
What is the fastest way to get out of debt on a low income?
Pay minimums on everything, send any extra to the highest-interest debt and roll each finished payment onto the next. Lowering interest through a hardship program or credit counselor speeds it up further.
Is the snowball or avalanche method better?
The avalanche usually costs less. In the example above it saves about $186 and a month. The snowball can be worth the extra cost for someone who needs early wins.
Should I save money or pay off debt first?
Build a small buffer first, around one week of essential spending, then put extra money toward the highest-interest debt while keeping a little going to savings.
Does a debt management plan hurt my credit?
The plan itself is not a loan, but the cards included are usually closed, which can lower a score for a while. On-time payments through the plan help rebuild it.
