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18 Ways To Become Debt Free

Updated: Aug 16, 2022


Women with her arms stretched out looking at the sun.
How can you become debt free, and is it worth it?

I hear people say they became debt free, and I often wonder what it really means. Because……….most times they are still paying a mortgage and/or a car note.


Everybody owes somebody, even rich people use credit. They may pay it off but at the moment they swipe, they owe.


So, does debt free mean you have paid off all your debt or does it mean you have paid off all your “bad” debt.


Can one truly be debt free?



What is debt ?


Debt is borrowing money from an entity. Now by entity, I mean: a person, a company, a financial institution, or government.


Some debt is considered “good debt”. When debt is going to increase your income, it is considered good debt. That makes sense!


This means your student loans and mortgage can be considered “good debt” because it has the potential to increase your income and grow your wealth.


Any debt, however, can turn bad if the rates are too high or it is not handled responsibly. So with that being said, if you aspired to be debt free, could you do it? Is it really possible or even plausible?


First, let’s take a look at 18 ways to become “debt free”....................


18 ways to become debt free


Debt avalanche
Refinance debt
Debt snowball
Re-examine your budget
Build a budget
Bump up your debt repayment percentage
Dedicate unexpected windfalls to your debt
Use savings to pay down larger debts
Meet with a credit counselor
Use your tax refund check to pay down debt
Negotiate debt settlement
Sell items for cash
Consolidate debt with a personal loan
Consider withdrawing from your life insurance
Use a cash-out refinance
Do a credit card balance transfer
Pay more than the minimum payment
File for bankruptcy (Last resort)


Debt avalanche

white snow falling down a mountain.

If you are contemplating making a break from mountains of debt, one method you could try is called “debt avalanche”. Debt avalanche is when you pay debt according to the APR %.


For example, if you have a credit card that has 25.5% APR, you would pay this off first, then pay off your car note that has an 6% APR.


You could do this with personal loans, student loans, mortgage, etc.

You would pay the minimum balance on all your loans, but pay a higher amount on the debt that has a higher APR %, until you are done with it.


Then move on to the next one.



Refinance debt

Interest is sometimes what kills us when it comes to debt. Most people don’t even see it coming, because they don’t see it’s costing them down the line.


They want to know what it will cost them now!


That's how lenders are hoping you think, when it comes to interest rates.


But to combat this, search for lower interest rates and refinance your debt. You can do this with just about any loan you have.


The less interest you have the faster you can pay off debt.


Debt snowball

A kid building a snowball.

Debt snowball is when you pay off your smallest debt first. You will still pay the minimum on your other debt. But you will put a larger amount on your smallest debt to pay it off.

For those of you who like to celebrate the small wins, this is a great strategy for you. It makes you feel like you are accomplishing something.

And, you are!

But, debt can be overwhelming and paying it off this way will give you little things to celebrate along the way.


Build a budget

Creating a budget is another strategy to become debt free. Knowing where each of your dollars are going will help you to decide where to best spend your money.

You will be surprised, despite the recession, the amount of money you have. But you will never know if you don’t take inventory of it.

I know this is making it seem like your finances is a “big corporation”, but when you stop to think about it, you are your business and your finances is corporation money.

Take inventory of what is costing your business so much money. Do it with the sole purpose of having extra to pay off your debt. Savings will have to wait.



Pay more than the minimum payment

To pay off any debt you have to give them more than they’re asking for. So try to pay more than the minimum balance to pay down or pay off your debt.

If you are tight on cash, start small , then, as you eliminate debt, instead of putting the extra into savings just yet, put it into paying above the minimum on another debt until you are done.

Re-examine your budget

Once you create a budget, revisit it in a few months. I personally re-examine my budget quarterly (every 3 months).

Now don’t get me wrong, I budget every month, using the “no budget” method…….yes this is a real thing………but I re-examine it quarterly.

If you are trying to pay off debt this is a good strategy, because we get so busy with life……..we get a good routine going, that we don’t realize that this routine may longer benefit our needs.

You may be at a point where you can allocate funds from one expense to help pay your debt faster.

You will never know until you take another look at that awesome budget you created.


Bump up your debt repayment percentage

Take the extra money you save to put towards lowering your debt percentage.

This means that you will have to forgo those name brands fo